By Dina Bass and Sarah Frier, Bloomberg News

PALO ALTO, Calif. – VMware Inc. is buying Nicira Inc. for $1.26 billion in cash and equity, adding technology that helps networks run more efficiently to broaden its appeal to companies seeking to cut hardware costs.

Palo Alto, California-based VMware, already the biggest maker of software that enables computers to handle multiple operating systems, will use the technology to offer similar services for networks that link computer systems, Paul Maritz, VMware’s chief executive officer, said Monday in a statement.

Software such as Nicira’s is designed to give technicians a faster and more efficient way to manage network changes and monitor them from one place. The products could help VMware lessen the need for types of networking equipment sold by Cisco Systems Inc., said Brian Marshall, an analyst at ISI Group.

“This is kind of a match made in heaven,” said Marshall, who’s based in San Francisco. “You’re taking a leader in virtualized networks and the gorilla of the dominant vendor in server virtualization.”

Cisco said yesterday that it’s cutting about 1,300 jobs, or 2 percent of the workforce, to reduce costs and streamline decision making as economic malaise threatens growth.

VMware is paying $1.05 billion in cash and $210 million of unvested equity awards for Nicira, which was founded in 2007 and also based in Palo Alto. Nicira was advised by Frank Quattrone’s Qatalyst Partners LLC.

VMware, 80 percent-owned by EMC Corp., separately reported second-quarter profit that beat analysts’ estimates as companies invested in its virtualization software. VMware had reported some preliminary quarterly figures when it said last week that Pat Gelsinger will succeed Paul Maritz as CEO.

VMware last week also raised its revenue predictions for the year to as high as $4.64 billion from $4.63 billion, which is “a modest surprise” given the weak economy, said Cowen & Co. analyst Gregg Moskowitz in a note.

“If they don’t raise guidance as a result of this acquisition people will think they bought their way to the earnings forecast for the year,” said Brian Freed, an analyst at Wunderlich Securities Inc. in Denver. Still, “it’s a good strategic fit. Network virtualization is a logical place for VMware to go.”

VMware fell 3.2 percent in late trading yesterday after earlier slipping less than 1 percent to $89.23 at the close in New York. Through yesterday, the shares had climbed 7.3 percent this year.

–With assistance from Jordan Robertson and Ari Levy in San Francisco and Sarah Frier in New York. Editors: Reed Stevenson, Tom Giles