Pure Digital (Flip Video) In Acquisition Discussions; Cisco May Be Buying (Updated)

San Francisco based Pure Digital Technologies, the seven year old company behind the Flip Video line of video cameras, is considering a sale of the company, multiple sources have confirmed. One interested buyer is rumored to be Cisco.

Flip cameras – dead simple and small video devices that are tailored towards users who want to upload video to the Internet – have become massively popular. One source says the company has sold more than $200 million worth of the tiny cameras in the last couple of years. Based on reviews of the recently released Flip Mino HD, we’re not surprised. The devices cost between $130 and $230 and have spawned a large group of copy cat competitors.

One potential buyer, says a source, is Cisco, which has been more active recently in acquisitions. Ned Hooper, Cisco’s chief M&A guy, is said to be actively looking to buy or invest in consumer startups that offer high-bandwith-using services. A hot startup like Flip, which is helping to fuel the explosion in user generated video (much of which makes its way online), fits in perfectly with that strategy.

The company is backed by Sequoia Capital, Benchmark Capital, Crescendo Ventures, Focus Ventures, Morgan Stanley, AllianceBernstein and Steamboat Ventures (the venture capital arm of the Walt Disney Company) and has raised at least $68 million in venture funding.

Update: We’re getting another source that says this “is a done deal,” that Cisco is confirmed as the buyer and that the price is “north of $500 million.” Founder and CEO Jonathan Kaplan is said to be taking around $80 million off the table personally. This hasn’t been confirmed.

Update: It’s a done deal.