Cisco Systems (NASDAQ:CSCO), aiming to mount a challenge to software defined networking products (SDN) technology, is acquiring the remainder of a data center technology startup in which it already owned a majority stake.
The acquisition of Insieme could cost Cisco up to $863 million, Cisco said. Cisco had invested $100 million in the San Jose, Calif-based company in April 2012 and agreed to commit an additional $35 million the following November after Insieme met certain conditions, which Cisco did not specify.
Cisco had already owned 85 percent of Insieme. The final acquisition price will be pegged to sales targets that Cisco did not revealed.
Insieme was founded by three Cisco employees who have previously created two other Cisco-funded companies, one in data storage and one in high-speed networking.
Like Insieme, these companies also were designed to be purchased by Cisco, a creation known as a “spin in” company.
And now, Insieme has its first products, a response to the SDN technology that is growing among rivals. SDN offers virtualized software that does not need to run on the expensive routers and switches that Cisco makes. That presents a challenge to Cisco’s bread and butter business.
CEO John Chambers discussed the new products Wednesday at a New York event, Reuters reported, telling customers and technology partners that Insieme products would “reset the stage for IT for the next decade.”
SDN rivals to Cisco include Arista Networks; VMware, which entered the space through its acquisition of Nicira; Juniper Networks and Hewlett-Packard.
David Krozier, a network infrastructure analyst with research firm Ovum, said in a research note that Cisco is trying to emphasize that hardware is just as important as software in deploying this technology.
“Cisco continues to promote the role of hardware in delivering future high performance networks and took great pains to distance itself from pure software based overlay virtualized networks (like the Nicira technology VMware acquired, Junipers Contrail, and Alcatel-Lucent’s Nuage) in the data center.”
HP, which sells servers that run SDN technology, responded by criticizing Cisco’s strategy. Dave Larson, HP’s networking chief technology officer, said Cisco’s offering, “locks customers into a proprietary Cisco network.”
