VMware Pushes Deeper Into Data Center with Nicira Buy

VMware Inc. (VMW) pushed deeper into the data-center business by acquiring networking company Nicira Inc. in a deal valued at $1.26 billion, one of its priciest purchases ever.

Nicira makes virtual networks that can be built rapidly on unused network capacity, similar to the approach VMware has taken to create virtual computers on a single computer server. Combining the companies is an attempt to quicken VMware’s goal of creating software-defined data centers to replace the hardware-dominated model used by most companies.

“Just as we have done with computer virtualization, Nicira has done for the network space,” said Steve Herrod, VMware’s chief technical officer. “It advances the ability to define and configure networks on the fly.”

VMware said it will acquire Nicira for $1.05 billion in cash and about $210 million of assumed unvested equity awards. The acquisition is expected to close in the second half of the year, VMware said.

Both companies are based in Palo Alto, Calif., and it is the third recent acquisition for VMware, which also acquired DynamicOps, a provider of cloud automation, and Wanova, which manages desktop virtualization.

VMware is majority-owned by storage vendor EMC Corp. (EMC), VMware confirmed that Pat Gelsinger, president and chief operating officer of EMC’s information-infrastructure products segment, will become its chief executive on Sept. 1.”This wasn’t a deal that was sitting on its own,” said Constellation Research analyst Ray Wang. “There was some competition for it.”

Meanwhile, VMware CEO Paul Maritz will move to EMC and take a job as its chief strategist, responsible for the company’s technology strategy, with a focus on Big Data and the next generation of cloud-based applications.

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