Updated from 12:24 p.m. EDT

Tech bellwether Cisco ( CSCO) may be targeting mini camcorder maker Pure Digital as a possible acquisition, according to media reports, a move which would take the networking giant further into the lucrative consumer market.

Citing a number of anonymous sources, the TechCrunch Web site names Cisco as a potential buyer of Pure Digital. One source even describes the acquisition as a "done deal" that is valued at more than $500 million.

Neither Cisco nor Pure Digital would comment on the rumors when contacted by TheStreet.com Monday, although Cisco appears keen to expand beyond networking into the server and consumer markets.

Up till now, Cisco's consumer business has been spearheaded by its Linksys wireless devices, modems and set-top boxes from its acquisition of Scientific Atlanta.

Confronted with an increasingly tough spending climate, however -- Cisco recently slashed its third-quarter sales forecast -- the networking firm may be looking to open up new revenue streams.

Cisco's shares have plunged almost 41% in the last 12 months, and mirrored the broader retreat in tech stocks Monday, slipping 56 cents, or 4%, to $13.62.

Pure Digital would certainly offer a gateway into a new and potentially money-spinning market. The startup launched its flagship Flip product in May 2007 and sold its one millionth camera last October, underlining the growing popularity of mini camcorders.

Cisco also has a strong cash position to fund any M&A activity. The San Jose, Calif.-based company, which recently sold $4 billion of senior debt, exited its second quarter with $30 billion, although $26 billion of this is said to be overseas.

The rumored Pure Digital deal also shines a spotlight on Cisco's broader acquisition strategy.

The company -- no stranger to M&A -- typically seeks out relatively small acquisitions such as PostPath and Securent, although it threw down $3.2 billion to acquire WebEx in 2007 and spent $6.9 billion to buy Scientific Atlanta in 2005.

Cisco CEO John Chambers has already stated that downturns are the best time to make acquisitions, and there has even has been media speculation linking the networking giant with a number of big-name firms. These include storage colossus EMC ( EMC), virtualization specialist VMware ( VMW), and ailing tech giant Sun Microsystems ( JAVA).

Storage and virtualization are perceived as two of the more robust parts of the tech sector and could dovetail nicely with Cisco's existing product portfolio.

The networking specialist, which competes with Juniper Networks ( JNPR), Nortel Networks ( NT) and Riverbed ( RVBD) already touts a number of storage networking products, for example, and is a major partner of EMC's.

Cisco is also an investor in VMware, and increased its stake in the virtualization pioneer last year. The networking firm now owns approximately 1.7% of VMware's total outstanding common stock. The two companies have also worked closely on a number of initiatives, including Cisco's Nexus 1000V virtual software switch.

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