Cisco will acquire Pure Digital Technologies, makers of the Flip Video brand of video cameras, for $590 million in stock.
Flip Video cameras have been designed with ease of use in mind, and grant the ability to upload videos to the web via YouTube, MySpace and other popular sites with just a few clicks. Pure Digital has sold more than 2 million units so far.
The acquisition is a part of Cisco's strategy of expansion into the consumer market, said Ned Hooper, a Cisco vice president. "This acquisition will take Cisco's consumer business to the next level," he said.
The company has built a home networking business around Wi-Fi firm Linksys, which it acquired five years ago.
In addition to $590 million in stock, the company will provide up to $15 million in retention incentives for continuing employees.
New York Times tech columnist Ashlee Vance said the acquisition was an unusual move for Cisco, particularly now that major players such as Sony have introduced competing products.
Vance speculated that Cisco is more interested in the Flip Video software than the hardware, and added that Cisco loves anything that will drive up web traffic, and thus demand for its routers and switches.
Cisco expects to close the deal in the fourth quarter of fiscal 2009, although the deal is subject to various closing conditions, Hooper said.