VMware to acquire virtual networking startup Nicira for $1.26 billion

By Lee Kaelin on July 24, 2012, 11:30 AM

VMware, a virtualization technology specialist announced on its official blog yesterday that it will acquire California-based networking startup Nicira for $1.26 billion, as the firm looks to further bolster its leading position in the virtual machine marketplace.

“Today I am extremely excited to announce VMware’s acquisition of Nicira, a 5-year-old company that has pioneered software-defined networking (SDN) and is the leader in networking virtualization for heterogeneous infrastructure environments and clouds.  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,” wrote Steve Herrod, VMware’s chief technology officer.

VMware will pay $1.05 billion in cash and a further $210 million in unvested equity awards to purchase the virtual networking firm, and will encourage Nicira’s employees to continue their efforts with open source networking projects, like the development they led with OpenFlow, a software-defined networking protocol and OpenStack Quantum networking software.

Nicira’s software specializes in creating an abstraction layer between servers and networking hardware, enabling those using them to decouple the network topology from equipment and create virtualized pools of network capacity. The software they make is supported by a variety of networking hardware, such as NICs, switches, appliances and network APIs.

“The value we bring to customers lies in our open approach and the richness of capabilities in network virtualization,” said Martin Casado, co-founder and chief technology officer at Nicira.  “The combination of Nicira and VMware brings together two pioneering teams, and gives customers the industry leading SDN solution for any cloud environment, on any hypervisor in the enterprise and with Service Providers.”

The deal has been approved by the boards of directors of both companies and is expected to close by the end of the year, following regulatory approval.  Nicira will come under the direction of the Cloud and Infrastructure Division at VMware, although its currently unknown how many of the staff will transfer to its new owners, or what will happen to the people that founded the firm.

User Comments: 5

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RajeGera RajeGera said:

VmWare is the best to create VPs nad they certainly have the monopoly in the market.Its the good decision as Nicira's software is implemented with entirely different approach than VmWare and they have been getting good market in the industry.

captainawesome captainawesome said:

HOLY fricken crap. Is it just me or are these costs for company purchases getting out of hand?! One bil for Instagram now this.

1 person liked this | Leeky Leeky said:

@captainawesome I think it was a strategic move as well. If VMware hadn't purchased them, another major cloud player would have and technologies they have could have used to innovate will be used to put more pressure on them in the longer run.

They've paid a heavy price, but the reward they will get in return for the innovation it can bring to their products will eventually give them a far greater return.

1 person liked this | wujj123456 said:

HOLY fricken crap. Is it just me or are these costs for company purchases getting out of hand?! One bil for Instagram now this.

I swear their assets and talents are much more than Instagram. Instagram is just a consumer product after all (or more precisely, some random app), but these guys are working on big things in datacenters. That's true tech.

Upio said:

HOLY fricken crap. Is it just me or are these costs for company purchases getting out of hand?! One bil for Instagram now this.

1 bil for Nicira is nowhere near as bad as 1 bil for Instagram. At least Nicira has valuable technology.

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