Cisco was in the mix to acquire hotshot software-defined networking startup Nicira, but was outbid at the last minute, according to a report.
Cisco was cut out of acquisition talks after VMware swooped in with a $US1.2 billion offer last month, reported Bloomberg.
The deal was formally announced in late July. VMware will pay $US1.05 billion in cash and $US210 million of assumed unvested equity awards for Nicira. The deal is subject to shareholder approval and is expected to close by the end of the year.
It's unclear how Nicira, which in the past two years stacked its team with veteran executives from Cisco, Juniper and other companies, would have complemented -- or replaced -- the SDN technology under development at Cisco and the Cisco-seeded startup Insiemi.
But a Nicira buy wouldn't have been all that surprising for the networking king, whose role in the emerging SDN ecosystem has been questioned and which has returned to its traditionally frequent pace of M&A activity.
Nicira's Network Virtualisation Platform (NVP), which the company officially unveiled in February, is a software system intended to provide distributed virtual network capabilities to cloud-ready data centers.
Nicira's edge is in how the system itself is decoupled and independent from physical network hardware, and the buzz generated around the NVP put Nicira in the vanguard of emerging companies focused on the SDN trend. Several other startup SDN companies, including Big Switch Networks, are often mentioned as acquisition targets for tier-one vendors like Cisco, IBM and Oracle.
VMware's acquisition of the company makes it more of a competitor to Cisco, with which VMware, and VMware's majority parent EMC, is otherwise closely aligned in the market for converged infrastructure.
Cisco, for its part, has sunk $US100 million into a startup called Insiemi, run by the same engineers who had a hand in previous so-called Cisco "spin-in" acquisitions. Cisco finally confirmed initial details about Insiemi during the Cisco Partner Summit in April, including that it retains rights to acquire the company for up to $US750 million on top of the initial investment.
Cisco's role in the SDN segment -- a market expected to produce some $US14 billion to $US17 billion in revenue by 2016, according various analyst projections -- has been a subject of much discussion thanks to the perception that network virtualisation technologies will further limit the need for the types of expensive, proprietary switches and routers that remain Cisco's bread-and-butter.
Cisco has argued, however, that the shift toward programmable, virtualisation-centric networks make its networking expertise and enormous global installed base more relevant than ever.
"If there's any company that's going to reinvent networking, it will be Cisco," Cisco CTO Padmasree Warrior told CRN in April. "We have the talent and the breadth and the depth to do that. It goes beyond just SDN to certain elements of network visibility, such as analytics and big data. But, we want our partners to understand that Cisco is working on enabling all the capabilities needed for the network of the future."
Along with Insiemi, Cisco's nascent SDN strategy includes the announcements it made at Cisco Live in June, including a software development platform, Cisco ONE, for engaging developers on a few different Cisco operating systems, and new support for OpenStack on Cisco's Nexus1000V virtual switch.
Cisco will report its fiscal fourth-quarter earnings later this week.