VMware buys Nicira for $1.05 billion

VMware buys Nicira for $1.05 billion

Summary: VMware eyes software-defined networking as it aims to take its virtualization efforts to the network.

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VMware said Monday that it will buy Nicira in a deal valued at $1.05 billion in cash.

Nicira specializes in open source software for network virtualization. VMware will also assume $210 million in unvested equity awards. 

The deal is expected to close in the second half of the year. The acquisition puts VMware in the market for "software-defined networking." In other words, VMware is looking to virtualize networking like it has the data center.

For VMware, Nicira is part of an effort to put together what it calls the software defined data center. VMware has obviously established a dominant presence in virtualizing servers in the data center. Nicira was backed by Andreessen Horowitz as well as Lightspeed Venture Partners and NEA. Ben Horowitz said in a blog post that VMware picked up a product and team that can make it a serious networking player. 

With Nicira, which only just started production systems, VMware acquires the networking part of the virtualization stack. VMware is also owned by EMC, which happens to focus heavily on virtualizing storage.

All of those pieces combined give VMware an interesting value proposition. Technically, VMware defines the software-defined data center as one that can grow and shrink as needed.

Nicira has a strong customer roster including AT&T, eBay and Fidelity. Nicira's flagship product is the Nicira Network Virtualization Platform, which aims to speed up services. VMware said it will continue to support Nicira's Open VSwitch technologies. 

niciraoverview

Last week, VMware and EMC officials repeatedly referred to the software-defined data center as they swapped executives

Separately, VMware announced its second quarter earnings, which were in line with what it outlined last week.

The company reported earnings of $192 million, or 44 cents a share, on revenue of $1.12 billion, up 22 percent from a year ago. Non-GAAP earnings were 68 cents a share. U.S. revenue was $551 million and international sales were $572 million in the second quarter.

VMware said its third quarter revenue will be between $1.11 billion and $1.15 billion. Wall Street was looking for sales of $1.14 billion for the third quarter. VMware said 2012 revenue will be between $4.54 billion and $4.63 billion.

According to VMware it ended the third quarter with cash, equivalents and short-term investments of $5.3 billion.  

Topics: Cloud, Virtualization, VMware

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3 comments
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  • Good Idea!

    I use VMWARE Workstation all the time for so0ftware development and testing. This acquisition makes a lot of sense to me.
    PC Ferret
  • Good Idea!

    I use VMWARE Workstation all the time for so0ftware development and testing. This acquisition makes a lot of sense to me.
    PC Ferret
  • Falling asleep at the network switch.

    With everybody else falling asleep at the network switch, VMware and Nicira have cornered the virtual server market and thus became indispensable to cloud-based services.
    But up to now these two had at least each other to compete with. This has assured both strong development in virtual controllers and servers as well as fair pricing.
    Now, however, the two are about to become one. With everybody else lagging far behind, they will be able to not only monopolize the virtual server market, but also annihilate the old hardware-based switches from Cisco and company.
    "So what," you say. "Survival of the fittest."
    Not so fast.
    With the Cisco hardware obsolescence will come a dependency on virtual controllers and servers. This is not bad in itself since they streamline the setting up and maintenance of networks.
    But it can be bad if the virtual controllers and servers take hold to the exclusion of everything else.
    Aside from the inherent monopoly in this, we will also have a dependency on a networking platform -- which though efficient, economical, and ingenious -- has nonetheless not been around long enough to warrant a complete reliance on it.
    A go-slow approach, therefore, might be in order and the Justice Department perhaps ought to look at all the ramifications before it gives its blessing to VMware to buy Nicira.
    Besides, the two companies have already worked out the necessary protocol to coexist in networks -- without being the same entity.
    Staying that way might be better for all of us for the time being.
    kafantaris