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Tech Check
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WebEx made sense. Scientific Atlanta was a stroke of genius. Linksys. Stratacom. And any of the other dozens of acquisitions Cisco Systems [CSCO
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] has made over the years seem to blend nicely into the company's overall plans.
Today's $590 million play for Pure Digital, the makers of the wildly popular Flip cameras is raising some eyebrows.
I heard rumblings about this a few weeks ago, but to be honest, didn't pay much attention to it because the deal just didn't make sense. TechCrunch was all over this possibility, by the way. Meantime, I moved on to something else. Which is why I'm still here and not enjoying a blendy drink on some sailboat somewhere.
So Cisco called me this morning, with Ned Hooper, who runs Cisco's corporate and consumer groups, and Jonathan Kaplan, Pure Digital's CEO, on the line to help me make sense of this big foray into consumer electronics, which now pits the company against consumer goliaths like Sony [SNE
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], Samsung and so many others scrambling for ever shrinking consumer dollars.
And that's one of the reasons why Pure Digital might be so attractive. The company with only 105 employees, makes a $100 digital camcorder that quickly, and surprisingly, became the hottest video camera on the market. Number 1 in the US with 20 percent of the market, according to NPD. Its sales pace eclipsed Sony in the marketplace, and its innovation momentum continued strongly last year when it introduced a tiny, inexpensive high-def version of the Flip for about $230. As an aside, my budding, 8-year-old filmmaker Jeb loves his Flip. The cams store 30 to 60 minutes of video, works with PCs and Apple's Macs[AAPL
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]. Instant movie-making, and easy uploads to his youtube channel so he could share it with his friends.
Precisely the kind of thing Cisco might be interested in. The company already has a big play in set-top boxes with Scientific Atlanta. It makes consumer routers. Digital phones. It took the stage at the Consumer Electronics Show in January to unveil its sweeping new consumer electronics strategy. So in many respects, this takes the company's consumer electronics strategy to a whole new level, and goes to show that Cisco might be interested in anything that fills the network with new data, whether its consumer or enterprise.
"We look at market transitions," Hooper tells me. "As we saw the downturn coming 18 months ago, we really stepped back, and asked strategically for us, what are the market transitions that create big opportunities? One of those key transitions was video."
And Cisco wants to be the one that helps corporate users and consumers capture and then share their experiences, whatever they might be, through video, on a network. The Pure Digital technology is an easy-to-use platform that does all these things: capture, communicate, publish and share. When you're talking soup to nuts solutions, that's why such a tiny company can command a $590 million price tag.
The deal with Cisco was a difficult one for Kaplan who tells me, "When we started the company, we knew we would build a multi-billion business...If this were the end, I'd be disappointed, but (the deal with Cisco) this is the beginning…It was a tough decision for me personally and our investors," which include the investment arm of the Walt Disney Co.
This will also be the beginning of a new career for Kaplan who will stay on at Cisco as the company's new consumer electronics general manager. He'll report to Hooper who tells me Cisco's got a track record second to none of integrating acquisitions into the Cisco fold. Kaplan might quickly find himself one of the most influential executives in this new world order of all things digital media.
Questions? Comments?
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