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Will Cisco go into the smartphone business this year?

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High end users do not just want attractive smartphones, but phones that perform at least one task really well. Hence the appearance of location-optimized phones from Garmin/Asus, social networking phones from INQ and other and the host of handsets that claim to be as good a music or camera experience as a dedicated MP3 player or digital camera. All this creates higher usage and more and more data traffic, which suits the operator - and Cisco.

The king of IP data traffic has increasingly looked to sell the devices that drive this traffic too, and recently added Pure Digital, maker of the Flip budget camcorder, to its portfolio. Surely it is only a matter of time before it brings out a smartphone, which could act as a focal point for all its consumer electronics and home networking devices, and even incorporate the Flip technology and other Cisco offerings like its mobile VoIP technology?

A research note from UBS summed up Cisco's interest on consumer devices. Pure Digital "will add to Cisco's arsenal of products aimed at driving increased network bandwidth … As more consumers upload video content to the web, it will also drive demand for Cisco's traditional products - switches and routers." The same could be said of advanced handsets, and there is a rising tide of reports that Cisco will produce one of these (or acquire a vendor) for mid-2010.

In a research note earlier this month, RBC Capital Markets' Mark Sue wrote: "Considering its big push into the consumer market, we believe Cisco may be developing a smartphone of its own, slated for mid-2010." Cisco has filed various patents in this area recently, including one for "managing time delays in relaying video wirelessly to consumer electronics devices"; and another for streaming video on a network connected phone. The frequency with which portable devices are mentioned in recent Cisco patent filings led even BusinessWeek to give credence to talk of a Cisco phone.

The magazine points out that, as of last fall, the networking company had sold 168m consumer gadgets (more than the total iPods sold), and has many of the components in place already for the whole wireless media story, at home and on the road. These include set-top box firm Scientific Atlanta, Wi-Fi leader Linksys and now Pure Digital, plus aggressive developments in telepresence.

And Ken Wirt, VP of consumer marketing, helped develop Palm's first non-enterprise product and was global head of marketing for the smartphone maker. Of course, this only adds to speculation that Cisco might make a bid for Palm, especially if the launch of the Pre goes less well than anticipated, depressing the price. "[CEO John] Chambers talks about consumer electronics all the time," Wirt says. "It's an area where we see a lot of potential upside."

Copyright © 2008, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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