VMware to Buy SDN Startup for More Than $1B

VMware Inc. (NYSE: VMW) announced Monday that it's acquiring Nicira Networks Inc. , the prominant software-defined networking (SDN) startup, for $1.05 billion in cash.

The deal is actually worth a little more, as VMware is adding $210 million worth of unvested equity awards, according to the company's press release.

Nicira, for those not familiar with the name, is one of the startups that sprang from the OpenFlow work initially done at Stanford University . The company only launched in February.

The deal is expected to close in the second half of 2012.

Why this matters
If there was any doubt that SDN has reached fever pitch, this should dispel it. The biggest name in server virtualization is buying one of the hot startups that's most closely tied to SDN.

SDN is usually discussed as a way of virtualizing the network -- an extension of the work VMware already does. The acquisition could solidify an early leadership position for VMware in network virtualization.

But it could also be seen as a sign that VMware had quickly fallen behind as the SDN craze took hold. Only last week, VMware changed CEOs in order to better pursue the idea of the virtualized data cetner. It's clear now that the company is working hard to redefine itself for the next wave of virtualization.

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— Craig Matsumoto, Managing Editor, Light Reading