Until three years ago, Cisco Systems (CSCO) steered clear of cutthroat markets for high-tech consumer gear. It stuck happily to its business of selling high-margin networking equipment to corporations and communications providers.
But Cisco changed tack and in 2003 began a slow, steady march into homes with the purchase of Linksys Group, a maker of routers for consumers. Cisco reckoned it could compensate for lower gross margins on consumer products by keeping operating costs low while cranking up sales. The experiment worked, so Cisco quietly began looking for more deals. In July it went from home offices to the living room by buying tiny KiSS Technology, a maker of networked DVD players (see BW Online, 08/05/05, “Cisco’s Link to Your Living Room”).