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Is Cisco Eyeing Pure Digital?

 March 09, 2009 01:45 PM

Network equipment maker Cisco (NASDAQ: CSCO) is on the verge of closing a deal to buy Pure Digital, creator of the popular Flip Video cameras, media reports suggest.

One source says that the Pure Digital sale "is a done deal." TechCrunch estimates that the price of the deal is "north of $500 million."

In November, Pure Digital had said that it had sold 1.5 million units of Flip since its launch in May 2007. The company holds a 24 percent share of the camcorder market. The devices, which cost between $130 and $233, are selling like hot cakes amid rising popularity of video sharing sites like Youtube and Hulu. The company has currently 90 employees.

Pure Digital has raised nearly $68 million from various venture capital firms like Sequoia Capital, Benchmark Capital, Crescendo Ventures, Focus Ventures, Morgan Stanley, AllianceBernstein and Disney's (DIS) Steamboat Ventures.

It is being widely speculated that Cisco would take advantage of depressed valuations of tech stocks to its advantage and would acquire smaller firms, especially startups.

Last month, Cisco CEO John Chambers had said that there would be "multiple acquisitions, but most of them will be small." Also, Cisco recently raised $4 billion from the debt market, suggesting that the company is interested in acquisitions.

Earlier, reports had surfaced that Cisco is interested in acquisition of virtualization software maker VMware (NYSE: VMW) or its parent EMC (NYSE: EMC).

The company has a strong balance sheet and is sitting on a cash pile of $30 billion. In January this year, the San Francisco, California, based company acquired Richards-Zeta Building Intelligence Inc. Cisco acquired a total of five companies in 2008.

Last month, Cisco reported fiscal second quarter earnings of $2.1 billion, or 33 cents a share, on revenue of $9.8 billion, matching Wall Street estimates.

Cisco fell 36 cents or 2.54% to $13.83 in afternoon trade on Monday. Shares of the company are down nearly 50% from 52 week high of $27.72.

Disclosure: Author does not own any of the stocks discussed here.

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