Cisco invests $150 million in VMware

Two weeks after Intel announced an investment in the virtualization company, the networking giant forks over cash to gain a 1.6% ownership position and a seat on the board.

Palo Alto, Calif.-based VMware Inc. announced today that Cisco Systems Inc., the San Jose, Calif.-based networking behemoth, will acquire an equity position in the virtualization company. Cisco will purchase $150 million of VMware Class A common shares held by VMware's parent company, EMC Corp.

Cisco's investment will net it an approximate 1.6% ownership stake in the company, plus a seat on VMware's board of directors.

More on investment in VMware:
Intel buys into VMware

The stated rationale for the investment is "to strengthen to strengthen inter-company collaboration towards accelerating customer adoption of VMware virtualization products with Cisco networking infrastructure," VMware said in a statement. The companies will also engage in joint development, marketing, customer and industry initiatives.

Earlier this month, Intel Capital announced a similar investment in VMware, pouring in $218 million for a 2.5% ownership position and a seat on the VMware board.

Even prior to the announcement, there were indications of something afoot between the two companies. This week, VMware announced that Cisco CEO John Chambers would give the second-day keynote at VMware's upcoming VMworld 2007show in San Francisco this September.

Also earlier this week, at the Cisco Networkers conference in Anaheim, Calif., the company announced the Cisco Data Center 3.0 initiative, including its VFrame appliance for aggregating compute, network and storage resources as a virtualized resource. VFrame, a rebranded version of the TopSpin InfiniBand switch that Cisco acquired two years ago, reportedly has the ability to provision ESX servers, according to a report by Alessandro Perilli.

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Let us know what you think about the story; e-mail: Alex Barrett, News Director.

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