VMware Plunks Down $1.2 Billion To Acquire SDN Startup Nicira

VMware was a latecomer to software-defined networking, but its $1.2 billion acquisition of SDN startup Nicira, announced Monday, could help catapult it into the thick of this fast-emerging market.

VMware will pay $1.05 billion in cash and $210 million of assumed unvested equity awards for Nicira, a Palo Alto, Calif.-based startup that has lured high profile talent away from Juniper and Cisco, including Alan Cohen, Cisco's former vice president for enterprise and public sector, who is vice president of marketing at Nicira.

The deal, which is subject to regulatory approval, has been approved by the boards of VMware and Nicira and by Nicira shareholders. The companies expect to close the acquisition by the end of the year.

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VMware CTO Steve Herrod said VMware will continue supporting Nicira's Open vSwitch and its Network Virtualization Platform (NVP), which connect heterogeneous network infrastructure and are designed for cloud-ready data centers.

"When combined with the outstanding networking team and technologies already at VMware, I believe we have the same opportunity to do for networking what we’ve already done for servers and many other parts of the datacenter," Herrod said Monday in a blog post announcing the deal.

"VMware is committed to maintaining Nicira's openness and bringing additional value and choices to heterogeneous environments and the OpenStack, CloudStack and other cloud related communities," Herrod said in the blog post.

NVP is implemented at a network edge and managed through what Nicira calls a "distributed clustered controller architecture." The software system itself treats the physical network as an IP backplane, and Nicira's system creates the virtual networks that can offer the same services as physical networks.

Nicira created OpenFlow, started the Open vSwitch project and is leading the Quantum project within OpenStack, Martin Casado, co-founder and CTO of Nicira said in a blog post. Nicira's technology fits well with VMware’s server, storage and network technologies, he added.

"As we move to the future with VMware we absolutely stand behind our commitment to contribute and even accelerate these projects going forward. The cloud is about openness. Openness is in our roots, and it will stay there," Casado said in the blog post.

Nicira was founded by Stanford University researchers Martin Casado and Nick MeKeown and University of California at Berkeley researcher Scott Shenker, and is backed by Andreessen Horowitz, Lightspeed Venture Partners and New Enterprise Associates. Diane Greene, co-founder and former CEO of VMware, and Andy Rachleff, co-founder of Benchmark Capital, are individual investors in Nicira.

PUBLISHED JULY 23, 2012