VMware announced plans to acquire Nicira Inc., the leader in software-based networking and open source network virtualization. VMware will acquire Nicira for $1.26 billion composed of a cash payout of $1.05 billion and $210 million in “assumed unvested equity awards”. Founded in 2007, Nicira changes the paradigm for enterprise networking by creating software that virtualizes networks. Customers can use Nicira’s software to create virtual data centers derived from software that aggregates abstracted hardware resources. Nicira’s virtual networking software uses automation to allocate the pooled, abstracted hardware resources to an ecosystem of computing, storage and networking components. Virtual networking provides IT managers with greater networking topology options and also reduces complexity and expense.
Nicira’s customers include DreamHost, eBay, NTT and Rackspace. The acquisition opens up market opportunities for VMware, which is owned by EMC, in the networking virtualization space alongside its core business virtualizing devices and servers. Investors in Nicira include Andreessen Horowitz, New Enterprise Associates and Lightspeed Venture Partners. Nicira’s virtual networking software is the brainchild of Martin Casado, the company’s co-founder and CTO, who worked on the concept of virtualized networking for his Ph.D. at Stanford University.