Rumors from TechCrunch are flying hot and heavy that networking giant Cisco will acquire Pure Digital, a $200 million producer of the low-end Flip camcorders that has been disrupting the market. TechCrunch says that Cisco will be paying north of $500 million for the company, which would 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.
Whether this acquisition goes through or not, it 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.