Cisco Takes On the Home Market

| About: Cisco Systems, (CSCO)

By Vince Vittore

Cisco Systems (NASDAQ:CSCO) today finally productized what it announced in January at the Consumer Electronics Show and was a poorly kept secret over the last week–a fully operational home telepresence unit. The solution is officially dubbed Umi (kind of sounds like you-me), and includes a set-top like box and a camera designed to sit on or underneath a flat-panel TV.

Selling through Best Buy (NYSE:BBY), Verizon (NYSE:VZ) and, Umi is as straight forward as you’re going to get in current video conferencing products. The box connects to a home network via Ethernet or WiFi and has a limited number our output ports including HDMI (HD is required or you can’t really call it telepresence).

Last week, Benoit Felten (his observations are here) and I were given a demo of the product in a live home setting as was Zeus Karavala (see his comments here). The video quality was outstanding, particularly when you consider that most homes have generally poor lighting conditions for a video production. The audio was less impressive with some echos heard throughout our conversation. It may have had something to do with the fact that we were speaking with someone in a high-ceiling office but such is life with live demos.

Pricing is getting plenty of early attention. Umi is listed at $599 for the box and requires a $24.99 per month subscription. That’s seems like a hefty price when you consider that connectivity is about to become as common a “feature” on TVs as HD and Skype is taken advantage by pre-integrating itself into many of those units.

That Cisco would move into the home market with telepresence isn’t a shock. It can be argued that the company has been building its case as a consumer electronics brand and the telepresence flag bearer for some time with the consistent play of Ellen Page commercials (expect more of those).

What is surprising is the go-to-market strategy. Umi is definitely a cool product and Cisco is taking a page from that brand named after a fruit by positioning it as a luxury item. But as a leader in the set-top box market, Umi would seem on a natural evolution path to be integrated into that ubiquitous box and sold through pay TV operators. Verizon hasn’t said exactly what it plans to do with Umi, but selling it as a premium add-on to FiOS TV or as an incentive to push consumers into higher tier Internet access would seem a natural. Verizon is presumably “getting it’s beak wet” with the service fee but neither company is talking about those details.

At $24.95, the service is probably priced too high for the average user but with some integration into existing devices there is a potentially compelling story for operators.

Disclosure: No position