Flip Camera

Cisco Systems Inc. Chief Executive Officer John Chambers. Photographer: Andrew Harrer/Bloomberg

Cisco Systems Inc. (CSCO)’s shutdown of the Flip video division lets Chief Executive Officer John Chambers get started on a bigger challenge: shoring up the main business of routers and switches.

The largest maker of networking gear faces a threat from lower-priced rivals, such as Juniper Networks Inc. (JNPR) and Hewlett- Packard Co. Routers and switches, which help businesses and carriers handle Internet traffic, account for about half of the company’s revenue.

Cisco, which said yesterday it will cut 550 jobs as part of the Flip closure, faces a trade-off between profit and market share. Its traditional networking gear has been its highest- margin source of revenue, propelling its dominance in the industry. As new competitors introduce cheaper alternatives, Cisco is struggling to maintain its lead without matching rivals’ price cuts, said Sean Conner, an analyst with Nuveen Asset Management in Minneapolis.

“If a customer only needed a Chevrolet, Cisco would sell them a Porsche even if they didn’t need the extra speed,” said Conner, whose firm sold its Cisco stake in January after holding the shares for more than five years. “Now they can’t because HP and Juniper came in and said to consumers, ‘Why are you paying for all that extra stuff?’”

Hewlett-Packard, the world’s largest computer maker, is selling more networking gear to capitalize on the growth of data centers -- the vast server facilities that power the Internet. Juniper, meanwhile, entered the switching market in 2008, building on its routing business.

Karen Tillman, a spokeswoman for San Jose, California-based Cisco, declined to comment.

‘Tough Market’

Chambers said last week that Cisco is taking a hard look at the switching business, where it has more than 80 percent global market share. Cisco is seeking ways to bring new products to profitability more quickly, he said.

“Switching is our challenge,” Chambers said last week at an investor conference in San Francisco, singling out International Business Machines Corp. (IBM), Oracle Corp. (ORCL) and Hewlett- Packard as rivals. “It’s going to be a tough market for us.”

Sales of switches rose 12 percent to $13.6 billion in the fiscal year ended in July, accounting for about a third of total revenue. In the subsequent six months, year-over-year growth has slowed to 7.2 percent.

Some networking rivals are willing to accept 40 percent gross margins on switches, while Cisco has typically seen 70 percent to 80 percent margins, Chambers said at the investor conference. Gross margin measures the percentage of sales remaining after deducting product costs.

Time to Choose?

“Cisco needs to choose between protecting share or preserving margins,” John Slack, an analyst at Citigroup Inc. in San Francisco, said yesterday in a note to clients. “It simply can’t do both.”

Chambers said in an April 4 memo to staff that he would make several “targeted moves” to restore lost credibility and sharpen the company’s focus. Shutting Flip, which Cisco bought for $590 million in 2009, isn’t enough to compensate for the declining profitability of its broader consumer business, said Alex Henderson, an analyst at New York-based Miller Tabak & Co. The company should exit that area entirely, he said.

“They’ve got a lot of work to do, and this is just a drop in the bucket,” Henderson said of the Flip decision.

The job cuts yesterday represent less than 1 percent of total employees and will take place by the end of the fiscal year, the company said. Cisco’s consumer division also includes Linksys home networking, and audio and media-storage products.

Home Video

Cisco bought Flip to expand its expertise in home-video networking, a bid that never paid off. Flip posted about $325 million in revenue last year, less than 1 percent of total sales, Citigroup’s Slack said.

Cisco’s gross margin narrowed to 64 percent last fiscal year from 70 percent in 2003, in part a reflection of the push into consumer products and pressure from rivals on prices of its corporate products.

The slump has taken its toll on Cisco’s shares, which have declined 34 percent in the past year. That’s wiped out about $50 billion in market value. The stock fell 3 cents to $17.44 yesterday in Nasdaq Stock Market trading.

Competition continues to mount. As Cisco was pushing into new areas, smaller companies such as Riverbed Technology Inc., F5 Networks Inc. and Aruba Networks Inc. have been able to gain an edge, according to Mizuho Securities USA Inc.

While these competitive pressures may have caught Cisco by surprise, they’re unlikely to keep the company down for long, said Rohit Mehra, an analyst at IDC in Framingham,Massachusetts.

“I don’t see a lot of these challenges as Herculean,” Mehra said. “We can call these small missteps. You will lose some market share when you’re the 800-pound gorilla.”

To contact the reporters on this story: Joseph Galante in San Francisco atjgalante3@bloomberg.net; Danielle Kucera in New York at dkucera6@bloomberg.net

To contact the editor responsible for this story: Thomas Giles at tgiles5@bloomberg.net

Gates, Buffet in Indian capital with their 'Giving Pledge'

New Delhi: Two of the world's richest people, Microsoft co-founder Bill Gates and legendary investor Warren Buffett, arrived in the Indian capital on Thursday to a packed schedule that mainly concentrates on their philanthropic efforts.

While Gates, along with his wife Melinda arrived here from Bihar where they reviewed the progress of their non-profit foundation's health initiatives, their mentor Buffett, on his maiden visit to India, landed from Bangalore after a series of meetings.

Their visits, though, have one common thread: Getting India's rich to pledge a decent portion of their wealth toward philanthropy on the lines of what they have themselves done.

Last year, they had undertaken a visit to China with the same objective.

Bill and Melinda Gates visit village in Bihar

"We are not here to pressure anybody. Everybody has his or her own understanding of philanthropy," Buffett had said in Bangalore on Wednesday. "We will be talking to Indian billionaires about our philanthropic activities and find out what they are doing."

The two billionaires also have coined a phrase for this initiative - Giving Pledge - and hope to get a keen ear from not just the 50 Indians figuring in the latest world's rich list of Forbes magazine but other wealthy people as well.

The Forbes list has placed Gates, 55, the second on its list with a net worth of $56 billion, while Buffett, 80, was ranked next with $50 billion.

In the capital, Buffett is scheduled to meet with Prime Minister Manmohan Singh and some of his cabinet colleagues later on Thursday, apart from addressing policy holders of insurance schemes launched by the $60-billion financial services firm Berkshire Hathway.

Warren Buffett bowled over by Indian hospitality

Among their engagements, the Gates are scheduled to share their thoughts on creating the right ecosystem to address public health concerns at an event to be attended by Science and Technology Minister Pawan Kumar Bansal and Communications Minister Kapil Sibal.

The Gates and Buffett also also scheduled to host an exclusive buffet dinner on Thursday to woo people towards philanthropy.

Groupon Revenue!!!

By most accounts, Groupon is growing like gangbusters. It’s taking market share around the world, hiring left and right, and priming for a $25 billion IPO. But how much of the group-buying site’s revenues are U.S. versus international and how is it doing in its home market, especially after its disastrous Super Bowl ads?

The chart above shows a pretty good estimate of Groupon’s monthly U.S. revenues based on an analysis of every Groupon deal on its site over the last year (each deal page shows how many Groupons were sold and the price). Some key takeaways: From January, 2010 to January 2011, Groupon’s U.S. monthly revenues grew eightfold from $11 million to $89 million. But February saw a huge 30 percent drop-off to $62 million. Was that a backlash because of the Super Bowl ads or simply a breather after three months of crazy holiday deals?

When you add up all of the monthly figures for 2010, it comes to an estimate of $460 million for Groupon’s annual U.S. revenue. That is 60 percent of Groupon’s rumored worldwide 2010 revenue of $760 million reported by the WSJ. And it also gels with this report on the U.S. group buying industry, which estimated total 2010 U.S. group buying revenues at $1.1 billion, with Groupon accounting for less than half. But the numbers being thrown out for Groupon’s 2011 revenues are in the $3 billion to $4 billion range. That means that either these estimates are low (a possibility), or that the bulk of Groupon’s growth is overseas.

This data came from a source I trust who monitors Groupon’s offers and has written custom software to gather the data. My source is not the only one doing this kind of digital sleuthing. Late last year, I received a similar data dump from another source that I never published because I wasn’t sure I could trust that source. Looking back now and comparing the two data sets, they are almost identical month by month. Again, these are just estimates based on the equivalent of scraping Groupon’s site, and thus could be missing something. Or something could have changed in February to make the data collection methods used less reliable.

But let’s look at one more set of data, this time from comScore. Its estimate of Groupon’s U.S. traffic shows it peaking in December. 2010 at 10.7 million unique visitors, and then drooping to 9.7 million in February, 2011. It stands to reason that traffic to a deals site is strongly correlated to revenues.

I reached out to Groupon CEO Andrew Mason about this data. He doesn’t talk about revenues, per his policy, but on the traffic numbers from comScore he says emphatically, “my man, don’t you know that shit is bullshit?” He sent me the Google Analytics chart at the bottom of this post, which he says shows Groupon’s true U.S. traffic trend. I guess we’ll find out how accurate this data is when Groupon files for its IPO, assuming it breaks out U.S. revenues in that filing.

Website:	groupon.com
Location:	Chicago, Illinois, United States
Founded:	November 11, 2008
Funding:	$1.14B

Groupon (www.groupon.com) features a daily deal on the best stuff to do, see, eat, and buy in more than 565 cities around the world. By promising businesses a minimum number of customers, Groupon can offer deals that aren’t available elsewhere.

… Learn More

Information provided by CrunchBase

Corporate Business Gifts - New Website Launched To Help Companies Find The Perfect Corporate Gift

Corporate-Business-Gifts.com is a new website recently launched to help companies and business owners find that perfect corporate gift for their clients and/or employees. This site will present viable and cost-effective options when it comes to corporate branding, employee incentive rewards and customer appreciation gifts.

 


Using corporate business gifts has long been a staple marketing strategy for many companies, big and small, mainly because these simple gifts can help cement relationships and create goodwill for all concerned. They create great Public Relations. Plain and simple.
"Any business operating today, shouldn't underestimate how far a simple gift can go towards creating customer loyalty," says Crystal Hoskins, who runs the new site. "This loyalty can have a direct correlation between sales and repeat customers; which over the long term can greatly affect a company's bottom line."
The main emphasis of this new Corporate-Business-Gifts.com will be on the marketing and promotional benefits of giving corporate gifts. How gift giving can help build your brand and gain recognition with consumers and shoppers. And how simple promotional gifts can be a cost-effective way of increasing your sales and for gathering new clients.
The site will cover and present the different categories of corporate gifts such as Employee Corporate Gifts, Promotional Corporate Gifts, Technical Corporate Gifts... and much more. Plus, the site will also cover the important position humor can play in corporate gifts and will explain this role via informative articles which visitors can find on the site.
Another emphasis will be on high-end luxury corporate gifts which will be balanced out with simple low-cost promotional gifts. Presenting a whole range of gift products to satisfy all tastes and requirements, no matter how simple or intricate, will be the main objective of this new site. Users of Corporate-Business-Gifts.com will find numerous gift ideas to match their needs.
All this is reflected in the site's main goal and theme: "Helping you find the perfect corporate gift".
More info:

Corporate-Business-Gifts.com is partnering with Bizwaremagic.com, which also runs a popular corporate business gifts section. Bizwaremagic will also help with the SEO and promotion of the new site. The first step was acquiring an older domain which first debuted in 2002 and going forward from there by providing valuable content and corporate gift products for all its visitors and clients.