Cisco Buys Flip Maker Pure Digital For $590 Million; Big Bet On Consumer Electronics

topics

News From Us:

Our latest report; our new video section; and jobs with paidContent.org and paidContent:UK

Cisco Buys Flip Maker Pure Digital For $590 Million; Big Bet On Consumer Electronics

Cisco (NSDQ: CSCO) is making an even bigger bet on consumer electronics in a direct way than it has ever done before: it is buying Pure Digital, the maker of the popular Flip video cameras, for about $590 million in an all-stock deal. In addition to the price, Cisco will provide up to $15 million in retention-based equity incentives for the execs and employees who are staying (it has 105 employees as of now). The acquisition is expected to close in Q4 of this year. More details in release. The rumors of deal talks were first reported by Techcrunch last week.

Flip’s line of pocket-size video cams have been known for their ease of use and FlipShare software, which allows users to upload or e-mail video to video-sharing sites like YouTube and MySpace. The products are usually priced between $100 and $229, and have storage space of between 30 and 60 minutes of video. Since its launch of the consumer videocam in May 2007, it has sold about 2 million in the U.S., and has been adding new products including the recently launched and well-reviewed Flip Video MinoHD.

It was backed by Sequoia Capital, Benchmark Capital, Crescendo Ventures, Focus Ventures, Morgan Stanley, AllianceBernstein and Disney’s Steamboat Ventures, to the tune of at least $68 million in disclosed money. This story says the company had revenues in the $150 million range in 2008, up from nearly $50 million in 2007.

Pure will become part of Cisco’s “Consumer Business Group,” which includes its Linksys home networking, audio and media-storage products. Jonathan Kaplan will become GM of the combined org. Cisco’s consumer push started in 2003, when it bought Linksys, and then acquired Scientific-Atlanta in 2005. Another reason besides Cisco’s expansion strategy: anything that helps pump a lot of video across the Internet means a lot of data, which in turn means greater demand for Cisco’s routers and switches, always a strategy for the company.

Related Stories

Rafat Ali

@rafatali Mar 19, 2009 9:23 AM ET

Posted In: Gadgets, Money, M&A & Venture Capital, Mergers & Acquisitions, cisco, flip, pure digital

latest headlines

xbox repair

I believe that this is a great decision on the part of Cisco to increase their consumer group. Hoping that this company strategy will really benefit the overall welfare of Cisco.

Mark Sigal

Two comments. One is that while in the abstract, I like this deal, I still can not figure out if Cisco's strategy in consumer space amounts to buying a bunch of disparate chicken parts (albeit with channel, brand, marketing leverage) or truly is a more than the sum of the parts strategy to assemble a living, breathing chicken (metaphorically speaking).

Two is that my litmus test for products like these are if my kids take to it naturally (e.g., my three year old is addicted to my iPod touch).

Along these lines, I bought my six year old a Flip Mino, and he took to it like a fish to water. Software works great, brain dead simple and quality is in the "good enough" bucket.

Btw, totally different angle on Flip Video, but check out my post:

Flip Video News - Crowd Sourcing meets CNN. (http://bit.ly/foo0)

Leverages the legions of Robert Scobles out there.

Cheers,

Mark