Why Cisco will eventually buy VMware
By Tarry Singh at 13 February, 2009, 11:59 am
Yesterday I was talking to a good friend, evangelist and one of the founding fathers of the x86 virtualization world — I was in a hotel and was making a couple of calls. We were discussing about some really really cool things. He is also [almost ready to be done with his patent filing on one of the ground-breaking CMotion stuff]. He’s onto some really cool things with the memory motion across the fabric, obviously Cisco came to discussion several times. We also spoke about several other network virtualization firms like Vyatta, Juniper etc etc.
We were discussing about why Cisco should not wait too long with that VMware acquisition as the Cloud Computing and all that latency, WAN optimization, FT, HA would all become irrelevant when we move to the most exciting part of the network, just like a human body’s CNS — Fabric Intelligence. VMware isn’t there yet but that will definitely fill in the gaps as more and more discussion will be on “the middle” and “owning the middle”, which is the network here. VMware is definitely the beginning and obviously many smarter firms [as I have predicted so often in the past] will be riding above the innovation [which would have reasonably stabilized and matured] to develop worknets on the new platform…well, Sun did say it but unfortunately couldn’t own it. The Network.
So why Cisco would be buying VMware? Answer = “The Network!”
Cisco System Inc’s (CSCO.O) pursuit of virtualization software maker VMware Inc (VMW.N) could be more serious than many on Wall Street believed, as the network equipment maker searches for new sources of growth.
Cisco has long coveted VMware, whose software helps computer servers run more efficiently and frees companies from having to maintain huge data centers. It went so far as to hold informal talks last summer to buy VMware’s parent EMC Corp (EMC.N) according to a person familiar with the matter.
The companies did not move into formal negotiations, and tight credit markets make financing the purchase of a $25 billion company difficult these days. But things could change quickly if EMC decides to put VMware on the market.
“This is a logical deal to do,” said a West Coast technology banker. “The question is, is it strategically compelling enough in this environment?”
Spokesmen for Cisco and EMC declined to comment.
Shares of VMware gained as much as 6.4 percent on Wednesday afternoon, while EMC shares rose as much as 3.3 percent, both on the New York Stock Exchange. Cisco edged lower on Nasdaq.
Jefferies & Co analyst Katherine Egbert said VMware shares rose on expectations that Cisco might buy EMC.
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