Cisco Systems Inc. launched a $599 home version of its TelePresence videoconference system as the network equipment maker seeks to expand in the consumer market.
The high price, and a $24.99 monthly fee, may make it tough for the world’s biggest network equipment maker to win much of a following among consumers, many of whom are using free, online video chat services like Skype, analysts said.
But they also said the move shows Cisco is set on keeping up its double-digit revenue growth even as its traditional equipment business matures, by expanding its target from business clients to consumers.
“I think the difficulty is probably the monthly price. $300 a year forever, that’s a lot of money,” said Gartner analyst Ken Dulaney. “But this is a premium product. And I think it will set the imagination off with a lot of people.”
The home TelePresence product, called “umi,” features a camera and console that connects to a standard high-definition TV and works over high-speed Internet. It also allows unlimited calls, video messaging and video storage.
The product will be available next month, and can be pre-ordered on Cisco’s website. Best Buy will sell it starting next month, and Verizon Communications Inc. will sell it starting next year, Cisco said.
BOARDROOM TO LIVING ROOM
Cisco already sells a high-end videoconference system for businesses. These systems, often built to simulate boardroom-like settings, can cost around $300,000 per unit. They feature high-quality video and sound, with limited delays, making users almost feel like they are meeting in person.
Despite initial skepticism over whether many businesses would pay so much, particularly amid a weak global economy, TelePresence has become one of Cisco’s fastest-selling products as companies seek ways to save on travel costs.
The company had made no secret of its ambition to replicate that success in the consumer market, and Chief Executive John Chambers has long been vowing to come out with a cheaper version.
While Cisco has not yet established itself as a consumer brand, it wouldn’t be its first foray into the living room. It has acquired home router maker Linksys, cable set-top box maker Scientific-Atlanta, and more recently, the company that makes the Flip video camera.
Analysts said the high price of umi may mean mass adoption is years away. Many predicted the price to come down over the next few years, but they also noted the likelihood that competitors like Skype would introduce higher-quality services in the meantime.
Skype, for its part, said in its blog that a $599 device could be “subject to obsoletism at the hands of mass-market options.”
“And, when unbeatable lower cost, high performance options are readily available, spending at the top-end can be like throwing money away, especially if you are buying a video calling system and there is no one else to call,” wrote an executive, Jonathan Christensen.
Marthin De Beer, head of Cisco’s emerging technologies business group, said umi’s quality differentiated it from other video products.
“It is about a new experience in the living room, to connect with friends and family. It is different, it’s a new class of product and you will see that the experience is transformational,” he said at a launch event in San Francisco.
Cisco also sees high-quality videoconferencing opening up new opportunities like distance-learning and remote medical care.
“Very, very soon you’re going to see us virtualize services into the home, just like e-commerce has virtualized with the advent of the browser, in ways that will enable the delivery of health care, education, government services,” De Beer said.
Some analysts also said that even if Cisco has a hard time competing with the likes of Skype, it would not necessarily be a big loss. A growth in popularity of web chats in general drives up Internet traffic, boosting demand for Cisco’s routers and switches.
