Cisco Hires Barclays To Help It Off-Load Linksys

Wardrivers take note: You may not have as many Linksys routers to hack if Cisco's rumored sale of its consumer-facing Linksys unit actually happens. Well, you will, but the technology may be in a whole other form.

The name "Linksys" was synonymous with home-network routers throughout the world, as driving with a Wi-Fi device down most streets will demonstrate. I can go out into my backyard right now and find three Linksys networks in range (along with a couple of Netgear routers and a whole bunch of AT&T U-Verse and Comcast routers).

The proliferation of AT&T U-Verse and Comcast routers may be one of the reasons why Bloomberg is reporting that Cisco has hired investment-bank Barclays Plc. to sell the Linksys unit, which Cisco bought with much fanfare for $500 million in 2003.

Cisco is not commenting on this news, so one should take it with the requisite grain of salt. But the move would match Cisco's pattern of dumping its consumer businesses. In April 2011, Cisco announced it would shut down its Flip camera business. The idea was -- and still is -- to get back to Cisco's priorities: "core routing, switching and services; collaboration; architectures; and video."

Presumably Linksys would not fall into core routing, but one would imagine that Cisco might make an exception for its subsidiary if Linksys were bringing in significant money.

When Cisco picked up Linksys for a mere half-billion dollars, it was estimated that router maker had something like 39% of the home-networking market. Orders for Linksys products have since weakened significantly. In 2010, In-Stat said Linksys' revenue amounted to just 9% of total revenue for the market segment.

One reason why Linksys may have stumbled so far could be broadband providers policy of leasing equipment to customers -- equipment that comes as part of the deal for most broadband contracts. While tech-savvy consumers are more likely to save the monthly equipment rental fee to go buy something else on their own, a majority of subscribers won't bother.

Linksys devices were occasionally part of the packages offered by the broadband firms, but not often enough to change its fate.

For these people, the rental cost is transparent; just something that's part of the monthly bill. Plus, setting up a router on your own, when the one that the broadband provider gave you is working just fine seems silly to them. Normally, I could get haughty about security, but when my provider came in to install its box, the installers actually gave me a good lecture about changing the router's default password. (I sent the router back, but just to save the money.)

This will not be the end of Linksys, of course. There is already speculation that the technology will shift to the set-top box sector, and that's a pretty good guess. It's a very sure bet that Cisco won't get nearly the price that it paid for the company nine years ago. But that will have to be the price Cisco pays to for its realignment.