Cisco to pay $590 million for Flip Video maker Pure Digital

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Flip Video cameras. Credit: Pure Digital Technologies.

Cisco Systems announced this morning that it had flipped open its wallet and agreed to pay $590 million in stock for Pure Digital Technologies, the San Francisco maker of the Flip Video camera.

The device, which sells for $129 to $229 depending on the resolution and storage size, is designed to make it easy for users to take quick videos and upload them to the Internet. Pure Digital has sold more than 2 million of the Flip cameras, which are dubbed ‘momcorders’ because they’re used by mothers taking video of their kids. The devices have also been adopted by hipsters who share video on websites such as YouTube and Facebook.

Pure Digital is backed by Sequoia Capital, Benchmark Capital, Crescendo Ventures, Focus Ventures, Morgan Stanley, AllianceBernstein and Steamboat Ventures — the VC arm of the Walt Disney Co.

The move shows that Cisco, which has provided the routers and switches used to create the Internet’s massive infrastructure, was serious about its recently articulated plans to expand into consumer electronics. At the Consumer Electronics Show in January, Cisco unveiled a music player that can wirelessly send tunes to any room in a house by tapping into song libraries from computers connected to the home’s network. Cisco also owns the Linksys line of routers, wireless cards and other home networking gear, which it picked up in 2003 by paying about $500 million in stock for Linksys Group.

The San Jose technology giant has amassed $29.5 billion in cash and short-term investments, making it one of a handful of technology companies with the wherewithal to acquire promising start-ups and midsize players during the credit shortage. Cisco has a track record of snapping up companies and letting them operate pretty autonomously. It plans to offer Pure Digital employees $15 million in stock incentives to remain with the company and keep making new versions of Flip cams.

-- Alex Pham