ANALYSIS-Cisco set on proving it can succeed in tablet market

Fri Dec 2, 2011 8:49pm GMT

Quotes

   

* Cisco broadens tablet lineup with upgraded Cius

* Aiming to make inroads in corporate technology market

* Critics say tablet "unnecessary sideshow" for Cisco

By Nicola Leske

Dec 2 (Reuters) - Cisco Systems Inc (CSCO.O) is stepping up its push to sell its Cius tablet computers to corporate customers, defying skeptics who say the product is short of the sex appeal and brand recognition it would need to win over the workforce.

In a sign of its confidence, Cisco says it will soon introduce a 4G version of the Cius, an upgrade to the 7-inch tablet computer that it began shipping to corporate customers in August. Cius, which plugs into a phone docking station, is built on Google Inc's (GOOG.O) Android operating software.

Whether Cisco's confidence is misplaced remains to be seen. By most accounts, it faces a number of challenges when it comes to selling Cius, not the least of which is that few people seem familiar with the brand.

Chuck Fontana, Cisco's head of product management, acknowledged that "people hardly know it exists because you can't get it at Best Buy, but this is not a device you get for your teenager."

Even with better brand recognition, there is a question of whether it has come too late to a market currently dominated by Apple Inc's (AAPL.O) iPad, which is both bigger and lighter than the Cius.

Still, Cisco, a network equipment maker, contends that Cius will appeal to corporations because of its advanced security options and features that allow customers to manage data or erase sensitive corporate documents remotely.

Cisco can also point to a handful of other appealing details: The Cius offers advanced video conferencing and functions as a phone on-the-go, while giving users access to games and media.

Cisco declined to say how many tablets it has sold so far but said about a thousand company customers have begun using Cius in the last three months. Among them, healthcare group Kaiser Permanente has been using Cius, and South African telecom company MTN (MTNJ.J) is rolling it out to its workforce, Fontana said.

For the new 4G version, Cisco has partnered with AT&T Inc (T.N) and next spring it plans to offer a Verizon Wireless (V.N) enabled version and more models with different screen sizes.

"You're always late in tech," said Fontana. "But this is really innovative."

FREEDOM OF DEVICE

There are doubts, however, that Cius can win over corporations in a world where employees increasingly want to bring a device of their choice to work.

"We can see that Cisco believes enterprise communication is evolving toward tablets, but find it hard to believe that most people will end up using Cisco tablets for that purpose," J.P. Morgan analyst Rod Hall said in a note.

Carolina Milanesi of Gartner research agreed. "As an employee you want a tablet that was created as a tablet, one that's sexy not one that's coming from desk phones."

Traditionally, employees have expected to have little say when it comes to technology they use in the workplace. That is changing, according to research that shows the freedom to choose devices is becoming key factor in job satisfaction.

Some 40 percent of college students and 45 percent of young professionals would choose a lower paying job if it allowed device flexibility, among other things, over a higher paying job, a recent study published by Cisco itself showed.

Gartner's Milanesi said that Cisco could potentially manage to corner a small part of the tablet market but that she was not sold on its approach.

"We are not great believers in a tablet as a phone to take with you," she said, adding that among the 58 million to 60 million tablets estimated to be shipped this year the Cius was "really a drop in the ocean".

Cisco isn't the only one betting -- rightly or wrongly -- on demand for a business-specific tablet.

Research in Motion Ltd. RIM.TO launched the Blackberry Playbook but has had disappointing sales. Hewlett Packard's (HPQ.N) Slate and Dell Inc's DELL.O Latitude, both of which run Windows 7, are also entrants in the market. But they are geared more towards healthcare, education or retail workers who need a mobile device for charts or payments.

Next year Microsoft Corp (MSFT.O) is expected to launch a tablet.

"My concern with anyone targeting a niche market is that consumer tablets are going to be good enough to target any sector ... if you want to do anything in the enterprise you're going to have to have a lot of pluses," Milanesi said.

It makes some sense for Cisco to try to succeed in the tablet market, Milanesi said, but sticking to the software route may be better.

"We like most of Cisco's other initiatives lately but find the continued development of tablets an unnecessary sideshow to the real business of protecting and growing the switching and routing businesses". J.P. Morgan's Hall said.

(Editing by Paul Thomasch; Editing by Gary Hill)

((nicola.leske@thomsonreuters.com; +1 646 223 6134)) Keywords: CISCO/

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