Cisco today announced its intention today to acquire Pure Digital Technologies, the makers of Flip Video camcorders, for more than $600m. Pure has sold more than two million Flip devices since their launch. They had sold a million nearly a year ago so that gives some idea of the run rate. Flip launched in Europe last year, but we get the feeling sales have not taken off as much as in the US. There has been much hoopla around the fact that Flip has become a leading “camcorder” brand in no time. But in reality the company has created a new category distinct from the tape, disc or HDD-based devices that have traditionally dominated. The main market driver historically has been to offer the best possible video quality, and the best consumer camcorders now come pretty close to professional quality video capture. Pure Digital took another approach – it wanted to simplify the capture and sharing of user-generated video for the net generation, and its portability, fast boot-up, one-button recording, simple USB connection and automatic loading PC software were hits with people who would normally baulk at the complexity of traditional camcorder devices. I’ve been using a Flip device for the past nine months, and there is no question it is an easier decision to carry one of these than my albeit excellent Panasonic DVC device, as long as I’m not expecting to create high quality video. In fact, it’s been successfully used by children with virtually no training, as well as by technophobe adults of my acquaintance. Cisco’s Chris Dobrec told us the background to the deal: he was at a daughter’s school sports event and saw many parents capturing the action on their Flip devices. They seemed so cool he suggested Cisco buy the company. Observers are already questioning the $600m valuation, and understandably if annual sales of a million or so devices at $150 are the benchmark. But Cisco is more interested in the device usability and software sharing capabilities that Pure has developed, as well as the fact that Pure takes Cisco further into the video market, which is a strategic objective. We can expect to see those capabilities to be improved on and integrated into Cisco’s emerging consumer device and software portfolio, with its Media Hub at the centre. While we expect Cisco also to add improved connectivity, such as WiFi, to the devices, the wider strategic question is the size of the market opportunity for personal, single-function devices such as digital still cameras and camcorders, when mobile phones are increasingly sophisticated in those applications. How many different devices can we expect users to carry? For now, Pure has unique benefits for certain segments: other vendors are sure to match it before long. Twitter: twitter.com/DavidMercer_SA Client Reading: Digital Media Predictions for 2009