Acquisition complements Cisco's 'Build, Buy, Partner' innovation strategy in support of Data Center 3.0 visionApril 09, 2008
HONOLULU (Cisco Partner Summit 2008) - April 8, 2008 - Cisco® today announced its intent to purchase the remaining 20 percent interest in San Jose-based Nuova Systems, a start up focused on the development of next-generation products for the data center market. Cisco today also introduced the Cisco Nexus 5000 Series, the first product developed by Nuova. The Cisco Nexus 5000 is a 10 Gigabit Ethernet "top-of-rack" switch that offers unified fabric capabilities through the support for multiple data center networking protocols and software intelligence (Refer to related press release).
Prior to the acquisition, Nuova operated as a majority-owned subsidiary of Cisco, which had invested $70 million and owned 80 percent of the company. Cisco announced its initial investment in Nuova in August 2006 and announced an amendment to the agreement in April 2007 that expanded the development scope, increased the funding commitment and raised the maximum potential payout of the transaction to $678 million.
The Nuova transaction is success-based with the total value primarily determined by the revenue of Nuova products over three measurement periods. The first measurement period will commence in early fiscal year 2010, the second measurement period will commence in late fiscal year 2010, and the third measurement period will commence in mid fiscal year 2011.
The Cisco investment and Nuova subsidiary structure allowed both companies to collaborate actively in the development of the Cisco Nexus 5000 through technology sharing, product evolution and driving overall market acceptance of innovative data center technologies. As a result the Cisco Nexus 5000 is designed to be fully interoperable with the recently introduced Cisco Nexus 7000 Series switches through the sharing of a common product architecture, operating system and other software intelligence. The Cisco Nexus 7000 is an internally developed, modular data center-class switching system designed for 10 Gigabit Ethernet networks offering industry-leading performance scaling up to 15 terabits per second.
"To succeed in today's marketplace and effectively deliver on our business strategy to capture key market transitions, Cisco drives a combination of internal R&D, industry partnerships and corporate development activities," said Ned Hooper, senior vice president, Corporate Development and Consumer and Small Business Group, Cisco. "In many ways, the efforts supporting our Data Center vision are great examples of this 'build, buy, partner' innovation framework in action."
Nuova was founded by Ed Bugnion, Luca Cafiero, Prem Jain, Soni Jiandani, Tom Lyon and Mario Mazzola. Bugnion is a former co-founder of VMware and Lyon formerly founded Ipsilion Networks. Cafiero, Jain, Jiandani and Mazzola are all former Cisco executives. All six founders and the company's approximately 200 employees in San Jose and in Beaverton, OR are expected to join Cisco to continue working on data center-related projects.
Nuova will operate as an independent business unit led by Cafiero, Jain and Mazzola who will all report into John Chambers, Cisco's CEO and chairman. In addition, to help ensure alignment with Cisco's development priorities, Jain has been appointed as the ninth member of the development council in Cisco's Development Organization, joining Tony Bates, Marthin DeBeer, Kathy Hill, Ned Hooper, Pankaj Patel, Don Proctor, Manny Rivelo and Jayshree Ullal.
"Cisco's decades of switching innovation and expertise have it well poised to be the architect of the next-generation, network-centric data center, a vision defined as Data Center 3.0," said Mazzola, who is president and CEO of Nuova Systems. "We expect the Nuova team to make significant contributions toward the realization of this vision through products and technology that help enable data center consolidation and virtualization, while protecting customers' current data center investments."
The acquisition is expected to close in Q4 of Cisco's FY 2008. It will be acquisition No. 126 for Cisco overall and the fifth one in FY '08.
For More Information
Additional information and resources on today's announcement can be found in the Cisco online press kit at: http://newsroom.cisco.com/partnersummit/2008. More information and resources on the Cisco Nexus 5000 Series announced today can be found at: http://www.cisco.com/go/nexus5000.