Kara Swisher

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Flip Flips to Cisco for $590 Million in Stock (Plus the Press Release)

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.

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Another gadget you don’t really need. Will not work once you get it home. New model out in 4 weeks. Battery life is too short to be of any use.

— From the fact sheet for a fake product entitled Useless Plasticbox 1.2 (an actual empty plastic box) placed in L.A.-area Best Buy stores by an artist called Plastic Jesus