Cisco flips for video camera maker

Plans to buy Pure Digital, maker of the Flip Video camera, for $590M in stock

Cisco Systems Inc. said today it plans to buy Pure Digital Technologies Inc., maker of the popular Flip Video handheld camera, for $590 million in stock.

Cisco's payment would be in exchange for all of the shares of Pure Digital. Cisco said it would pay an additional $15 million in retention-based incentives for continuing Pure Digital employees. The acquisition is expected to be final in Cisco's fourth quarter.

Cisco has been making a push into video-related technologies for years, including faster networking technologies to transport rich media and video as well as videoconferencing data. The acquisition of Pure Digital is a key element in Cisco's plans to expand into what it calls the "media-enabled home," said Ned Hooper, Cisco's senior vice president of consumer groups.

More than 2 million units of the lightweight Flip Video have been sold. The camera allows a user to quickly capture, edit and share video, especially through Internet-based sites such as YouTube, Pure Digital officials said.

As part of the acquisition, Pure Digital CEO Jonathan Kaplan would become general manager of the consumer business group, which would combine the Pure Digital workforce with Cisco employees working on Linksys by Cisco home networking, audio and media-storage products.

Josh Martin, a senior analyst at Yankee Group Research Inc., said Cisco's purchase of Pure Digital falls in line with previous acquisitions Cisco has made of companies such as Linksys in 2003, Scientific Atlanta in 2005 and WebEx Communications in 2007.

"At first glance, the acquisitions of these disparate companies appear to be a mishmash of differently aligned visions," Martin said. "But deeper evaluation indicates [Cisco's] laser focus on improving the value of the network as a means for communication. Pure Digital may seem to just be an HD camcorder company, but it allows Cisco to place improved value on 'the network' while providing the company entry into consumer telepresence."

"Telepresence" is a term usually used to describe high-quality videoconferencing, with high-definition video and audio resolution.

Copyright © 2009 IDG Communications, Inc.

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