VMware Insists It's Not Warring With Cisco
The pending $1.26 billion acquisition of Nicira Networks Inc. would seem to pit VMware Inc. (NYSE: VMW) at odds with partner Cisco Systems Inc. (Nasdaq: CSCO)
Predictably, VMware officials say it's not so. But others find it hard to describe the situation without using the word "war."
"This is the first shot in the VMware vs. Cisco war," says Guido Appenzeller, CEO of Big Switch Networks , which, like Nicira, is an SDN-related, Stanford-bred startup that everyone's been talking about. "They used to be best friends, and that changed today."
"VMware has basically declared themselves a networking player, and the corollary to that is they have declared war on the networking industry," says Dante Malagrinò, CEO of SDN startup Embrane Inc.
A few analysts asked about this during VMware's earnings call Monday afternoon, but officials stayed polite. "We look forward to continuing to work closely with Cisco and our other ecosystem partners," outgoing CEO Paul Maritz said.
There's an argument to be had that VMware and Cisco could stay buddies for a while. It's similar to the Dell Technologies (Nasdaq: DELL) acquisition of Force10 Networks Inc. -- a move that got Dell into networking but didn't sever the company's partnership with Cisco, says Elizabeth Hedstrom Henlin, an analyst with Technology Business Research Inc. (TBR) .
"We're in a converging market on multiple fronts in multiple systems, so I don't see this as particularly combative. I see this as opportunistic," she says.
Nicira would give VMware an SDN story, and Nicira's open-source contributions could ingratiate VMware a little more with the open-source community. The acquisition would also stretch VMware's influence from the desktop all the way into the network. "That's a very credible end-to-end stack," Henlin says.
Nicira's software decouples virtual machines from network IP addresses. It's a step toward network virtualization, in which switching and routing resources become pools that any client in the network can tap.
VMware made its name doing the same thing for server capacity, and in fact, VMware sees a parallel between its early virtualization efforts and today's SDN development. History looks like it's repeating itself, which is one reason why acquiring Nicira became important even though the startup has practically no sales, Maritz told investors.
It doesn't bother VMware that Nicira will have no substantial revenues this year, or that the industry hasn't been screaming out with an SDN mandate. "It's the same thing with virtualization. Customers didn't ask us for virtualization 12 years ago," Maritz said.
Transforming the data center with SDN is central to VMware's new goals, and it looks like it's going to be a long process. Nicira -- and VMware's other recent acquisitions, such as DynamicOps and Wanova, two companies providing cloud-provisioning tools -- are being made "to strengthen our technology portfolio and prepare for the future," not for immediate revenues, Maritz said.
As part of that process, VMware announced last week that Maritz would step aside for Pat Gelsinger to become CEO.
— Craig Matsumoto, Managing Editor, Light Reading