Pure Digital, the maker of the popular Flip digital video cameras, has sold itself to Cisco (CSCO) for $590 million in stock.

The deal, which had been rumored last week by TechCrunch, was announced this morning by Cisco.

The innovative San Francisco-based start-up has made it big from its modest roots as a white-label digital video camera shrink-wrapped for themes parks and drug stores.

But the simplicity of its line of relatively inexpensive cameras, including the recently released Mino HD, has made it a huge consumer success, which is no easy task in the devices arena.

Using its own software, a user can plug the Flip into a USB port of computer to upload digital video easily. Flip models cost anywhere from $100 to $299.

Cisco has been trying to turbocharge its consumer-focused business, especially in home networking, and the move is a clear step in that direction. It is better known for its business making hardware and software that powers the plumbing of the Web.

Although it used stock in buying Pure Digital, Cisco has a $29 billion pile of cash. Recently, I wrote a piece about how a lot of tech companies, with big hordes of money, will soon be buying up a lot of the most promising tech start-ups.

The first commercially-branded Flips were, in fact, introduced at the third D: All Things Digital conference in 2005 by CEO Jonathan Kaplan (pictured here at D3.)

In an email to BoomTown this morning, Kaplan was happy with the outcome, because no matter its success, taking Flip to the next level is not easy:

“We’re thrilled by the partnership. Cisco shares my vision for capturing and sharing simple, accessible, and high-quality video to the mass-market consumer. Now we can deliver that ideal on a global basis.”

Cisco said that “upon the close of the acquisition, the Pure Digital team will become part of Cisco’s Consumer Business Group, which includes Linksys® by Cisco® home networking, audio and media-storage products. Kaplan will become general manager of the combined organization,” reporting to Ned Hooper, SVP of Corporate Development and Consumer Groups.

He and his team will also get a $15 million in retention-based equity incentives.

The sale to Cisco is a big win financially overall. Pure Digital got another $40 million in additional funding in mid-2007, from investors Morgan Stanley Principal Investment, Heights Capital Management and AllianceBernstein, who joined initial investors Sequoia Capital and Benchmark Capital.

It had previously gotten $28 million in 2004 from Sequoia and Benchmark, as well as Crescendo Ventures, Steamboat Ventures and Focus Ventures. It was founded with $200,000 in seed funding in 2001.

And, more to the point, Flip cameras have been used by me for nefarious interviewing of scared Web execs since our site’s launch. In fact, I have been so bizarrely enamored with the Flip that I even did a video of my many old Flips meeting the new high-definition Mino last November.

Here is that Felliniesque effort:

And here’s the full press release from Cisco about the deal:

Cisco Announces Intent to Acquire Pure Digital Technologies, Makers of Flip VideoTM Networking Leader Adds Popular Flip Video Solutions to Consumer Portfolio Photos

SAN JOSE, Calif.–March. 19, 2009–Cisco today announced its intent to acquire privately held Pure Digital Technologies Inc. San Francisco-based Pure Digital, creator of the best-selling Flip VideoTM brand, is a pioneer in developing consumer-friendly video solutions with mass-market appeal.

“The acquisition of Pure Digital is key to Cisco’s strategy to expand our momentum in the media-enabled home and to capture the consumer market transition to visual networking,” said Ned Hooper, senior vice president of Cisco’s Corporate Development and Consumer Groups. “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.”

Pure Digital’s Flip Video has sold more than 2 million units and quickly demonstrated market appeal in the United States by making video simple, accessible and fun. All Flip Video products come equipped with FlipShare, a best-in-class software that allows users to easily organize and edit videos and then share them instantly on YouTube, MySpace and other popular sharing Web sites.

“Flip Video puts the power to instantly capture, edit and share video into the hands of everyday consumers,” said Jonathan Kaplan, chairman and CEO of Pure Digital. “By combining forces with Cisco, we join a company that shares our passion for video and whose global scale and tremendous technology expertise we expect will enable us to quickly expand and enrich the Flip Video experience.”

Upon the close of the acquisition, the Pure Digital team will become part of Cisco’s Consumer Business Group, which includes Linksys® by Cisco® home networking, audio and media-storage products. Kaplan will become general manager of the combined organization, reporting to Hooper.

The Pure Digital acquisition exemplifies Cisco’s “build, buy and partner” innovation strategy to move quickly into new markets and capture key market transitions. Under the terms of the agreement, Cisco will pay approximately $590 million in stock in exchange for all shares of Pure Digital. In addition, Cisco will provide up to $15 million in retention-based equity incentives for continuing employees. The acquisition is subject to various standard closing conditions and is expected to close in the fourth quarter of Cisco’s fiscal year 2009. The acquisition will be accounted for in accordance with generally accepted accounting principles.

The Kodak Theatre HD Player’s motion-sensing pointer remote works much like a mouse on a TV screen.

This week I tested the Kodak Theatre HD Player, the photo-centric company’s attempt to snag valuable real estate in the living room. This small, black box pulls photos and videos from computers around the house and displays them on an HDTV. It also enables the sending and receiving of photos via Kodak Gallery, and connects to Web-based photos stored on Flickr, Facebook, Picasa, .Mac and others. Podcasts, Internet Radio and updates from news feeds, weather forecasts and stock quotes are also accessible using the HD Player. And it has a terrifically simple motion-sensing remote that works like using a mouse on a TV screen.

But the HD Player isn’t all smiles. Its $299 price doesn’t include any built-in storage for keeping content directly on the device. It currently has no way of accessing HD movies or television shows, nor will it work with Macs. In comparison, Apple’s (AAPL) $229 Apple TV has 40 gigabytes of storage, can access HD television shows and movies via the iTunes Store, and works with Macs and Windows PCs. This is important because as budgets tighten in the current economy, gadgets have to prove their value and versatility more than ever.

After using the Kodak Theatre HD Player with Windows XP and Vista machines over the past week, I can conclude that this device’s interface shines in its simplicity and is a lot of fun to use. Kodak teamed with Hillcrest Labs to make the player’s motion-sensitive remote and corresponding software, which includes satisfying extra features like images that automatically magnify when the remote control’s cursor points at them and icons that make chirping sounds when selected. The remote itself is shaped to rest comfortably in a hand and has three simple buttons and a scroll wheel.

Quick-access memory-card slots for six types of memory cards appear on the box’s front, and two USB ports can connect to digital cameras or USB storage devices.

Currently, the player’s software works directly with Flickr, RadioTime (8,750 radio stations) and FrameChannel, which grants access to various “channels” like Facebook, .Mac, Picasa, People.com news and National Geographic. Kodak says it will incorporate YouTube access in January; I got a sneak peek at the interface for this and it looks well-organized.

Yet the HD Player’s smart combination of software and remote left me wishing it did a bit more. Photo sharing is enabled only via Kodak Gallery, so you can’t use another Web-based account to share photos directly from your TV. Likewise, a blue light on the box slowly blinks only when new Picture Mail (a message containing shared photos) is received on a Kodak Gallery account, not when new photos are added on other sources such as Flickr Photostreams or Facebook pages.

The Home screen of the HD Player shows four categories: Pictures & Videos, Kodak Gallery, Music and Entertainment. Subcategories are where you might guess they would be, for example podcasts are listed under Entertainment. And a tiny Home icon appears in the top right corner of every screen so you can always get Home with one click. The Pictures & Videos category holds photos and videos from a currently selected Windows PC.

An unlimited number of Windows PCs can wirelessly pair with the player as long as they have special Kodak software installed on them. But only one PC’s content can be accessed at a time. I toggled between two paired computers without a problem, but would’ve preferred accessing music and photos from both sources simultaneously.

The HD Player’s motion-sensing pointer remote works much like a Wii remote control. Wherever you move it, a tiny leaf-shaped cursor appears on-screen. A Hide button on the remote will hide the cursor while you watch slideshows. The remote’s Back button is helpful; when pressed, it backs you out of one screen using visual effects that make the screen shrink into the TV as if you were moving backward.

A play button appears on the first photo in a folder so users can select this icon to quickly start slideshows. Whenever the HD Player receives new Kodak Gallery Picture Mail, or a slideshow is created on a connected PC, yellow alert circles appear on the screen to notify users and a number in the middle of these yellow circles indicates how many new items are available for viewing.

Some content on my PCs took a little while to be recognized by the HD Player, including podcasts that I subscribe to on iTunes. When they did show up, both audio and video podcasts played without issue and on-screen playback buttons made them easy to control.

The HD Player uses your photos to create automatically generated slideshows, called Picture Chronicles, once a week. These Picture Chronicles use up to 50 photos from the same time of year in all of your folders, for instance grouping all Thanksgiving photos together from the past five years.

Kodak has plans to make its player Mac-compatible in the future and also hopes to add other partnerships with new types of content following its YouTube announcement early next year.

The Kodak Theatre HD Player does its job well, bringing photos and videos that might otherwise live only on your PC to your big screen HDTV. For the holidays, this device could be a real plus. But Kodak has some work to do to make this a more useful Web-connected tool.

Edited by Walter S. Mossberg

• Email us at mossbergsolution@wsj.com. Find this and other columns and videos online free at the All Things Digital Web site: http://walt.allthingsd.com

Today, the folks from Hillcrest Labs visited me at my home to show off their latest version of what they call an “operating system for the television,” which they had first shown off as a demo at the D3 in May 2005. The Rockville, Md.-based company is one of many trying to reinvent the television navigation experience, complete with a remote control that is a round, motion-controlled device called the “Loop,” pictured here (and you can also see the pictures and video of the Hillcrest demo at D3 here).

Their visually based navigation system, which swoops in and out like a helicopter, is an attempt to free the consumer from the onerous and frustrating grid system that has used up too many minutes of consumers’ life. The centerpiece is obviously the Loop, which is moved about in the air somewhat like a mouse on a desktop and with only a few buttons and scroll wheel. It is certainly a welcome change from other remotes, most of which require you to have a degree in astrophysics to understand properly. I will be interviewing Hillcrest CEO Dan Simpkins again with others at a panel at the National Cable & Telecommunications Association’s annual show next Monday afternoon in Las Vegas, called “Everything I Need to Know I Learned from the iPod: Defining the Consumer Experience.”

There and in this column, I will be particularly focused on the ongoing issue of making television more interactive. It has been a minor obsession of mine, since I sat in on the pitch meeting the founders of TiVo did before venture capitalists back in 1997. At the time, after a day of sitting through a series of inane dot-com ideas, I was thrilled when this groundbreaking concept of control of the television experience was offered, even if TiVo’s business success has not been as profound.

That feels like an eon and a lot of false starts ago (oh, I had and then didn’t have WebTV). But, perhaps because consumers are finally comfortable watching video on the Web, it seems like the idea of truly incorporating these ideas may have finally come. TiVo has recently unveiled cool new abilities to put personal and Web videos on the television, big players like Apple and Microsoft are deep into the game with major offerings (after years of efforts) and small outfits like Slingbox (which allows you to “sling” content to a myriad of devices) are gaining traction. And, of course, despite the problems with its straps coming undone and minor mayhem following, consumer enthusiasm for the Nintendo Wii system is part of the same trend.

“This is about consumer choice and simplicity,” said Hillcrest’s Simpkins to me today. As it always has been.