"The most plausible reason is that Cisco wants the technology in the Flip more than it wants the business. Cisco is, after all, in the videoconferencing business, and the Flip’s video quality—for its size and price—was amazing. Maybe, in fact, that was Cisco’s plan all along. Buy the beloved Flip for its technology, then shut it down and fire 550 people."

Michael Mace points out that enterprise-focussed companies can hardly ever do consumer products effectively: "The transition to Cisco management happened at a terrible time for Flip. Just when the company's best people should have been focused obsessively on their next generation of camera goodness, their management was given new responsibilities, and Cisco started 'helping out' with ideas like using Flip cameras for videoconferencing -- something that had nothing to do with Flip's original customers and mission.<br />
"If Pure Digital had remained independent, would it have innovated quickly enough?  Maybe not; it's very hard for a young company to think beyond the product that made it successful.  But merging with Cisco, and going through all of the associated disruptions, probably made the task almost impossible."<br />
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There are examples of enterprise-oriented companies which can do consumer, but you won't need two hands to count them.

Interesting points from Swisher: (a) Flip was reportedly profitable as a unit, though not if you added on Cisco's corporate fundungles; (b) it had the largest single share of the US camcorder market, at 21%; (c) other companies would have been interested in buying Flip.<br />
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Cisco's decision is already looking like the crazed actions of someone (looking at you, John Chambers) who hasn't realised that day-to-day share price movements don't actually *mean* anything to the company itself. They don't affect its cash position, revenues, profits... nothing.