Cisco To Acquire Pure Digital For $590 Million

With the introduction of Linksys by Cisco, Cisco proved that it wasn't scared of sticking its neck out into the wild, dynamic world of consumer electronics. In an effort to prove once again that it's more than some networking company that just routes Internet traffic and pushes out witty commercials, the company has just made public its intent to shell out a rather huge sum of money in order to acquire Pure Digital.

If you're not quite familiar with Pure Digital, maybe "Flip Video" rings a bell? Said company, a San Francisco-based startup, is the creator of that very handheld camcorder, which has seen incredible adoption rates since hitting the market shortly ago. Ned Hooper (pictured), senior vice president of Cisco's Corporate Development and Consumer Groups, asserted that the acquisition is "key to Cisco's strategy to expand our momentum in the media-enabled home and to capture the consumer market transition to visual networking." He continued to say that Pure Digital has "has revolutionized the way people capture and share video with Flip Video" and that the deal would take Cisco's consumer business to the "next level as the company develops new video capabilities and drives the next generation of entertainment and communication experiences."

To date, Pure Digital has moved over two million of its Flip Video devices, all of which included the FlipShare software for easy uploading to YuoTube, MySpace and other video sharing websites. So, the question must be asked: why is Cisco even interested? Some analysts have suggested that Cisco's dive into the world of distributing high-bitrate video (teleprescence) could tie in here, but there's still quite a few links missing in the chain from where we stand. At any rate, the Pure Digital team will eventually become part of Cisco's Consumer Business Group, which includes the previously mentioned Linksys by Cisco home networking, audio and media-storage products.

Potentially most shocking about this whole ordeal is the price paid out to make it happen. Cisco has agreed to shell out approximately $590 million in stock in exchange for all shares of Pure Digital, not to mention another $15 million in "retention-based equity incentives for continuing employees." If all goes to plan, the deal will be closed in the fourth quarter of Cisco's fiscal year 2009.