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Cisco buys a hunk of VMware

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Another major Silicon Valley player has found itself salivating over the prospect of VMware's initial public offering.

Cisco today announced a $150m investment in the virtualization software maker through the purchase of VMware's Class A shares. Should the investment meet the usual closing conditions, it would give Cisco a 1.6 per cent stake in VMware. EMC is in the midst of selling off 10 per cent of VMware via an IPO.

Earlier this month, Intel revealed a $219m investmet in VMware. As a reward, Intel received a seat on VMware's board. The company has left open the option that Cisco too could gain a board seat in exchange for its goodwill.

Reluctant to take investments from its direct, server making customers, VMware has the hat out for just about anybody else on the periphery. The companies are fortunate to get a chance to jump on the VMware IPO, which is expected to be quite the sight. VMware continues to increase its revenue at between 90 per cent and 100 per cent per quarter.

Cisco and Intel should prove nature allies moving forward, as both companies can tweak their products to work well with VMware's software.

Cisco, however, just this week started rumbling about its own virtualization strategy where it relies on an Infiniband switch to manage disparate types of hardware. VMware enjoys a more direct path to the customer and clearly has the leading technology in the market at this time. ®

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