Cisco Systems Inc.’s plan to acquire the creators of Flip Video camcorders signifies a far larger philosophical and strategic shift for the San Jose, California-based IT bellwether, as it takes a major step into the consumer space, a company executive told TMCnet during an interview today.

 

According to Charles Carmel, Cisco’s (News - Alert) vice president of corporate business development, the company’s acquisition for $590 million of Pure Digital Technologies Inc. is the key transaction that will “take our consumer strategy to the next level.”

 

“Cisco has been an active player in the consumer market dating back to 2003 and the Linksys (News - Alert) acquisition,” Carmel told TMCnet. “We talked in January at the Consumer Electronics Show about accelerating our market strategy and position in the home, and we think this acquisition is going to be the platform that keys our position to the next level.”

 

Specifically, Carmel said, the company sees the next phase of the “connected” home – or home with, say, a Linksys router – as the fully “media-enabled” home, with a variety of media-enabled devices, where home network is used to consume and share and experience many forms of media.

 

“We think where all this is heading is the visual-networked home,” Carmel said. “We think that with the Flip, we now are able to take a major disruption in the video capture market and become an instant leader.”

 

As TMCnet reported, Cisco announced its plan to acquire San Francisco’s Pure Digital just days after upending the IT space by entering the computer server market.

 

Carmel conceded that the two moves – shifting toward enterprises by entering the blade server market while also targeting the home with the Pure Digital acquisition – reflect vastly different parts of Cisco’s business.

 

“But it all comes back to our highest-level vision about the network being the platform,” he told TMCnet.

 

In acquiring Pure Digital, Cisco takes into its fold a company that’s seen a meteoric rise in the past 12 months, selling more than 2 million units of its Flip camcorders (pictured right), including the Flip Mino, Flip MinoHD, Flip Ultra and Flip Video. The camcorders come with a software program that allows users to create mini-movies which are already common in popular social networking and video sites such as YouTube, Facebook and MySpace (News - Alert).

 

When the deal is done, Cisco says, Pure Digital’s workers will join the company’s consumer business group, which includes Linksys by Cisco home networking, audio and media-storage products. Jonathan Kaplan, chairman and chief executive officer of Pure Digital, will become general manager of the combined organization.

 

According to Carmel, though there are a number of companies focused on the consumer market, Cisco isn’t preoccupied with competitors who are there now.

 

“There will be competition, but our focus is really on identifying key market disruptions, like what the Flip does on video capture,” Carmel told TMCnet. “In our experience, it’s not really about where the historical competition is, but setting a direction for the future, and that’s what we believe we’ve positioned ourselves to do.”

 

So what does Cisco have planned for the Flip?

 

Asked whether Cisco has plans to add WiFi (News - Alert) or 3G connectivity to the device, to enable instant uploads to social networking and other sites, Carmel noted, first, that the Flip already has a built-in USB connection which makes the network a critical component.

 

“But we think one of the strengths that Cisco brings to the combination is new talent and the ability to think, over time, how to embed a router and wireless technology into the Flip device,” Carmel said. “We will be thoughtful about how we do that, but certainly that is something we will look at.”

 

A device like that could be the biggest thing since Apple’s iPhone 3G.

 

As TMC (News - Alert) President and Group Editor-in-Chief Rich Tehrani notes here in his blog this morning, Cisco’s efforts in consumer electronics haven’t been as successful as its efforts in the enterprise.

 

“But the company seems to believe if it sells enough products in the connected home, sooner or later it will become a preferred provider in the consumer setting,” Tehrani writes. “They could be right, but the problem for the industry today is the threat from Apple who will continue to own more and more of the home network and consumer electronics market.”

 

Carmel said that Cisco’s hasn’t broken down specific growth expectations for the Flip, but noted Pure Digital’s impressive track record.

 

“In a very short period of time, they’ve become the number one market share player in video capture,” Carmel said.