VMware Buys Sweet Silicon Valley Startup Nicira for $1.26B

Still, business will need time to reach critical mass

   

In addition to its earnings report out late Monday, VMware (NYSE:VMW) also just announced it agreed to shell out $1.26 billion for network-tech company Nicira.

It’s a hefty price tag for a startup, but Wall Street seems OK with the deal — so far in today’s trading, VMW shares are off less than 1%.

Founded in 2007, Nicira did not launch its service until February of this year, as the company needed time to create its intelligent software that manages routers and switches. It is a much cheaper way than the traditional approach, which is dominated by massive companies like Cisco (NASDAQ:CSCO) and Juniper Networks (NYSE:JNPR).

With the surge in mobile and the cloud, we need better systems for data center automation, and this means innovating the networking infrastructure.

Already, Nicira has snagged top customers like AT&T (NYSE:T), eBay (NASDAQ:EBAY) and Fidelity Investments.

Still, revenues are likely to be fairly small for a while. The market still is in its early stages — but, it could be a multibillion-dollar opportunity within a few years.

By leveraging VMware’s massive global footprint, Nicira might be able to accelerate the growth even further.

– Tom Taulli, InvestorPlace


Article printed from InvestorPlace Media, http://investorplace.com/2012/07/vmware-buys-sweet-silicon-valley-startup-nicira-for-1-26b/.

©2014 InvestorPlace Media, LLC

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