How Cisco Systems Inc. (NASDAQ:CSCO) Would Benefit From SDN Technology?
Cisco Systems, Inc. (NASDAQ:CSCO) announced to have bought out the remainder stake in Insieme, a start-up data center technology firm, in a deal that is expected to cost approximately $863 million. Cisco already owned 85% of Insieme. With this strategic acquisition Cisco is positioning itself well through Insieme’s first products related to SDN (Software Defined Networking) technology, a software technology usually found in high-end network hardware which the rival firms are increasingly betting on.
SDN technology could run on cheaper hardware and hence Cisco needed to find a way to protect its sales of expensive routers and switches. The Chief Executive Officer of Cisco Systems, John Chambers revealed to customers and technology partners at a New York even that the company would reset the stage for Information Technology for the coming decade with Insieme products and its approach would help save money while creating a multi billion dollar business.
Insieme was launched by Cisco with an initial investment of $100 million in early 2012 and later it had received a funding of $35 million in November 2012. This acquisition marks buy-out of a third start-up by Cisco which was created by long time Cisco engineers Prem Jain, Luca Cafiero and Mario Mazzola.
Rival firms gaining attention in SDN technology sector include Arista Networks – a privately held firm as well as VMware, Inc. (NYSE:VMW) that created buzz back in 2012 with over $1 billion buy-out of a SDN start-up Nicira in 2012. Recently in October 2013, it also acquired Desktone Inc. Despite being rival in this particular sector, Cisco shares long standing relations with VMware, Inc. when Cisco and EMC Corporation (NYSE:EMC) unveiled a joint partnership back in November 2009 with investments from VMware and Intel Corporation (NASDAQ:INTC) to form VCE company – a leader in converged cloud infrastructure systems that significantly reduce the IT costs while improving time to market for customers.