Why Did Cisco Buy Flip Camera Maker?


Cisco Systems on Thursday said it intends to plunk down $590 million in stock to acquire Pure Digital, maker of the pint-sized Flip Video line of cameras, a favorite among the YouTube crowd.

The acquisition, and its high-dollar price tag, has industry analysts wondering exactly why Cisco would scoop up a purely consumer-centric technology, that by many accounts is more a toy than a tool.

The answer to that is simple: Cisco wants to rule the world.

Well, that may be a little bit of an overstatement, but so far, Cisco hasn't found a market it didn't like and didn't want a big chunk of the available market share. The San Jose, Calif.-based powerhouse proved that this week with the unveiling of its Unified Communications System, a data center architecture that ties together the network, servers, storage and virtualization into one tight package, and also marks Cisco's entrance into the blade server market.

Cisco made a similar bold move several years ago when it planted its flag in the VoIP arena, a market in which Cisco has since become a dominant force.

And in 2005, Cisco bought Scientific Atlanta, a maker of cable television set-top boxes.

It's obvious that Cisco wants to offer a diverse portfolio and touch roughly every facet of technology.

So why the Flip camera?

Cisco has had video and Web 2.0 technologies blipping across its radar screen for the past few years, not just on the high-end business level with its TelePresence systems, but also on the personal level, releasing personal desktop videoconferencing systems. Then there's WebEx, which Cisco acquired in 2007. That buy gave Cisco a desktop conferencing application that has now spread beyond just the desktop to the Apple iPhone and other smartphones, like the BlackBerry.

Cisco could easily be plotting to wrap Flip cameras into its WebEx play, enabling users to film a quick presentation or tutorial to stream during a video conference.

Or, Cisco could be trying to raise its consumer profile of its Linksys by Cisco brand. Home users have become familiar with Linksys for its home networking gear. It would only make sense for their camcorders to eventually be networked into their wired homes.

Adding the Flip camera to its Linksys umbrella would mark the first true consumer product to stem from Linksys since Cisco acquired it in 2003.

"Pure Digital has revolutionized the way people capture and share video with Flip Video. This acquisition will 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," said Ned Hooper, senior vice president of Cisco's Corporate Development and Consumer Group, in a statement.

Whatever the reason, the Pure Digital buy is just another example of Cisco eyeing an emerging market and jumping at the chance to be a major player in it. At roughly 2 million Flips sold and approximately 25 percent of the current camcorder market, the Pure Digital acquisition swings the doors to that market wide open.

And for those wondering why Cisco wouldn't develop its own miniature camcorder in-house: Why would it? Pure Digital has proven itself a market leader with the Flip Video cameras. And if there's one thing Cisco knows, it's market leaders. The acquisition falls snuggly in line with Cisco's strategy to "build, buy and partner" to "move quickly into new markets and capture key market transitions." That strategy, Cisco CEO John Chambers has said, helps the company continually "catch the next market evolution."

With the Flip camera and Pure Digital purchase, it appears Cisco will do just that.