Update: Cisco announces acquisition of Pure Digital for $590 million

The second-most-speculated tech acquisition

As previously reported, the rumors from TechCrunch were confirmed that networking giant Cisco will acquire Pure Digital, a $200 million producer of the low-end Flip camcorders that have been disrupting the market.

Cisco announced it will acquire Pure Digital for $590 million, which will help drive the company's overall strategy of ensuring there's plenty of bandwidth-consuming consumer applications.

Last summer I tried out a Flip camcorder at OSCON to see how well it would work. While it's light on features, it's easy to use and is obviously growing by leaps and bounds.

What Flip Video does, is go back to the basics with a low-end easy-to-use point and shoot pocket-sized video recorder that gives up on all the non-essential bells & whistles to enable consumers to do two things really easily: shoot video and post it on the web. Pure Digital's business model is a classic example of serving the underserved. They've focused on providing basic functionality and ease of use to appeal to consumers who want to get results without the complexity or expense of a full blown camcorder. In fact, 50% of Flip Video owners already have a camcorder, presumably in a closet gathering dust.

This acquisition illustrates a common model: Small disruptive companies get acquired by larger firms as their markets grow. Cisco has a good track record of acquiring firms in new markets and letting them continue to operate independent of the mother ship without smothering them with bureaucratic process -- definitely a good model.

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