make up for the collapse of its other business. CIDCO’s shares dropped to under $3, and it was given up for dead. The company scraped along until 2001, when it was bought by EarthLink for a mere $5 million.
The loss of CIDCO as a marketing partner was a serious blow. It led to a recapitalization of the company that severely diluted early investors, although a new shareholder team, including Intel and Cisco, entered the picture. Those latter investors continued to believe the iPhone could blaze a trail that would lead to a new combination of Web and telephony.
With CIDCO out of the picture, InfoGear was forced to do all the development work on the second iPhone by itself. The “iPhone 2,” absent any CIDCO references, sported a second phone line, silencing the critics who complained about not being able to use the Web and the phone at the same time. And internally, InfoGear had ambitious plans for an entire family of products built around the iPhone, with color screens, video conferencing, Voice-over-IP and more.
Sales of the device continued through a variety of small retail channels, and via the Web. Eventually, 100,000 were sold. Other Internet appliances makers were getting the same sort of ho-hum reaction. The situation was summed up by a Wall Street Journal headline from the period: “The Future Calls: Smart phones have lots of cool features—but not all that many customers.”
As the iPhone continued to survive, Cisco, one of InfoGear’s second round investors, approached management with an offer to buy the company in March 2000 for $300 million in Cisco stock. Cisco said the iPhone could help it enter new consumer markets and praised the behind-the-scenes network management software that InfoGear engineers had created for the “cloud” operations that controlled the iPhone. The acquisition offer proved irresistible.
In the end, Cisco didn’t push the iPhone (a story that had a haunting sequel after Cisco bought videocam maker Flip nine years later). As the months went by, the iPhone team drifted away to support other Cisco products, or to other companies, and the iPhone slowly faded from the scene.
The word “iPhone” pretty much disappeared from the landscape, and it wasn’t heard much again until 2007, when Apple announced its own iPhone. Amid all the hype and fanfare of that second iPhone rollout, a few enterprising reporters noted that the trademark “iPhone” was still associated with Cisco. Apple and Cisco had to come to an agreement before Apple could use the word in its marketing material. The agreement was struck, and it was a final acknowledgement for the history books that while today’s iPhone is the most famous, it definitely is not the first.
