Light Reading

Does Cisco Need Nicira?

Craig Matsumoto
News Analysis
Craig Matsumoto
8/14/2012
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Now we know what made Nicira Networks Inc. worth more than US$1 billion: Apparently Cisco Systems Inc. (Nasdaq: CSCO) wanted the company, too.

Bloomberg reported Monday night that Cisco made a failed bid for the software-defined networking (SDN) company.

VMware Inc. (NYSE: VMW) announced a $1.26 billion deal for Nicira on July 23.

Why this matters
Bloomberg mentions Nicira in the larger context of the toughening competition Cisco faces. Systems vendors Arista Networks Inc. and Cyan Inc. also get cited as startups that offer alternatives to Cisco's equipment.

Cisco is trying to convince the world that it takes SDN seriously while also arguing that SDN -- which theoretically could create lower-cost alternatives to traditional routing -- isn't a threat. Cisco CTO Padmasree Warrior summarized the company's position in a blog recently. Analyst Tom Nolle of CIMI Corp. noted that the tone sounded defensive to him.

Cisco is nurturing its own SDN startup, the spin-in company Insieme ("spin-in" meaning Cisco intends to acquire it). But an interest in Nicira might suggest that Cisco sees some value in that company's concept of overlay networks.

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— Craig Matsumoto, Managing Editor, Light Reading

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Soupafly
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Soupafly,
User Rank: Light Sabre
12/5/2012 | 5:23:54 PM
re: Does Cisco Need Nicira?


Craig, your writing like a newbie.


What about;


a) IPR/ Patents around SDN & Overlay networking?


b) Time-to-market & strategic advantage?


c) Subject matter expertise of the Nicira staff?


All of the above would be more than enough to justify why Cisco should do the deal.


Frankly, I am suprised at John & his team here. Time & again John & his boys have strategically moved to take out competitors or achieve a TTM advantage/ tech edge.


They should have outbid VMware & sent out a clear message that they mean business in the SDN space. This is a dropped ball & a slapped wrist for John Chambers. Maybe letting Ned Hooper leave & promoting Padmasree was a mistake?


Its too early to make the call on Ned & Padmasree, especially when you dont have all the facts. However, Cisco had a deal construction & execution team that made arnie's famous robot blush! They were feared & respected under Ned. Can Padmasree deliver the same intensity & capability?


Given the huge cash stockpile they have offshore... this was a complete no-brainer. Hence my comments.


I am also 100% confident that;


1) Google is working to help & further develop the open source SDN movement & has a team working to contribute towards said objective.


2) Amazon is going to be interested in this area. They have BIG plans to be 1 of the global content hubs. SDN smarts would fit very neatly into a CDN story and that wider strategy.


(The is in bold because this is a 800lb gorilla game, imho. Only the biggest global players will survive because they will have the leverage in networking, customer relationships & content/exclusivity deals.)


Insieme; Putting all your faith in your spin-in is a risky strategy & not 1 that Cisco has ever deployed. They are smarter than that. So I don't think that blocked, stopped or significantly influenced this deal. I just think without Ned's focus & networking finesse they were out-maneuvered by the VMWare team.


 


 

Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:23:54 PM
re: Does Cisco Need Nicira?


I guess another reason for an acqusition would be to take the technology off the market.


That would have been an expensive proposition, though, and it's not as if it would have delayed SDN and overlay networks.

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