Cisco Flips Over Pure Digital

Cisco Systems went through with its head-scratcher of an acquisition, announcing on Thursday the purchase of Pure Digital for $590 million in stock.

While you may not recognize the Pure Digital name, there’s a decent chance that you’ve run across its Flip products. They’re the tiny digital video recorders that come in a variety of colors and make taking some video, slapping it on your computer and sending it to the Web about as easy as it can be.

Rumors of Cisco’s interest in Pure Digital started to appear a couple of weeks ago, and most of the people I talked to couldn’t quite figure this one out.

After all, Pure Digital has enjoyed runaway success with its Flip Video, Ultra and Mino products, selling more than two million units, but the big guys have caught onto that fact. Other companies, including Sony, now offer similar products.

Is the Flip brand really worth almost $600 million? Probably not.

I imagine, however, that Cisco has fallen in love with the company’s software. You just plug the Flip products into a U.S.B. port, which introduces Pure Digital’s management application. Then you can save files on a PC or hit a couple of buttons and send the videos off to YouTube, Facebook or some friends via e-mail.

According to people I’ve talked to, the Pure Digital folks are thrilled to have found a willing suitor.

The company started off by selling disposable digital cameras to pharmacies, thinking people would essentially rent cameras and take them back to the store for prints. As one ex-employee politely put it, “This was a novel concept, but there were some economic issues.”

Then the company came up with a crude video camera that you could take to a store to produce a DVD. Again, economic issues.

One pharmacy, however, suggested something rather like the Flip recorder, and an economically viable idea was born.

The founders of the company were more Web guys than consumer electronics guys, and hawking a low-cost device while battling Sony wasn’t exactly their game.

Now Cisco can go to war against the consumer electronics giants. May the best minicam win.


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