Cisco's Latest Buy: Flippin' Sweet
Cisco Systems Inc. (Nasdaq: CSCO) dived deeply into consumer electronics today, announcing a deal to buy Pure Digital Technologies Inc., maker of the Flip line of handheld video cameras, for roughly $590 million in stock. (See Cisco to Acquire Pure Digital.)
Cisco has sold consumer products before, such as the home router brand now called Linksys by Cisco. But the Flip is a less geeky kind of consumer product and could lead to Cisco's first direct clash with a mammoth consumer player like Sony Corp. (NYSE: SNE).
Rumors of the deal circulated earlier this month. Cisco had already talked about seriously expanding its consumer business, and a debt offering pumped speculation that an acquisition was in the works. (See Cisco Goes Consumer, Cisco Keeps the Service Provider Faith, and Cisco's Got Cash.)
So, why did Cisco do it? It certainly wasn't for the video quality. As Consumer Reports noted when reviewing the Flip Mino in August, the little cameras lack features like good image stabilization. You can see the results at about the 2:15 mark of this video.
Consumer Reports points out that poor video quality is a "deal breaker... unless you're planning to use it only to create videos to post online – where compression will all but eliminate differences in quality between the best and worst home videos."
That's the part Cisco is counting on. Pure's mission as part of the digital fold would be to help consumers shovel more video -- especially high-definition video -- onto the net, regardless of whether it's any good. That, in turn, could increase service providers' demand for more routers with video-minded features.
The Flip satisfies that account, because it comes with software tailor-made for posting to Internet sites.
The deal is expected to close by the end of July. Pure would be included in Cisco's consumer group, the home of the Linksys by Cisco brand. Pure CEO Jonathan Kaplan would become general manager of the group, reporting to senior vice president Ned Hooper.
— Craig Matsumoto, West Coast Editor, Light Reading