I have very high regard for VMware and some of the founders of Nicira like Scott Shenker. I love VMware's products and really believe that they are big time game changer and real catalyst for growth of next generation of data centers and so called cloud. Scott Shenker on other hand is great technologist with super cool ability to convey them to masses like me. I loved his talk in Ericcson conference on SDN. For those who are interested can view it on http://www.youtube.com/watch?v=WVs7Pc99S7w
Coming back to this latest acquisition.. All these terms like Cloud, Virtualization, SDN (Software Defined Networks) etc.. are really hot as of now.. I see this acquisition more of extension of the hype surrounding these terms.. SDN is great concept and in my view has great potential.. So is NVP (Network Virtualization Platform) which is already foundation of existing Virtualized Data Center. But SDN is more or less in infancy and key thing there is execution and marriage of software and generic enough hardware. NVP alone is not going to be big enough driver to change the game. Current VMware and other companies' products work fairly well already.
My point is... One Billion Dollars is lot of money.. What ever Nicira has done so far can be easily done (execution) with couple of hundred million dollars of investment or development in even big companies like VMware.. I think there is got to be some premium for talent and what is already available vs. being development effort in big company like VMware.. However.. I am still not convinced that it is right thing for VMware shareholders. It is more of whims and fancies of Sr. Execs which determines these exorbitant purchasing prices.. These type of acquisitions are the mostly responsible for slower or lethargic growth as these companies mature. There is hardly any accountability.. Nobody will be ever fired if VMware is not able to realize even half of the dollars they had spent. We have seen that in many other companies... actually, for that matter, this is really small amount to be bothered in a company like VMware.. but still, if you look from Share holder's perspective.. it is not change.. In my view they should fix some accountability issues.. also.. explain why and how they need Nicira.. how they are going to realize commercial value out of it..
VMware will pay $1.05 billion in cash, plus assume responsibility for $210 million in stock awards that Nicira had given its employees. The purchase of Nicira, whose early customers include AT&T, eBay, Fidelity Investments and the Japanese telecom giant NTT, means a handsome payoff for its investors, including Andreessen Horowitz, Lightspeed Venture Partners and NEA.
“VMware has led the server virtualization revolution, and we have the opportunity to do the same in data-center and cloud networking,” CEO Paul Maritz said in a statement. “The acquisition of Nicira adds to our portfolio of networking assets and positions VMware to be the industry leader in software-defined networking.”
In a statement that described its efforts with Nicira as creating “the architecture for the cloud,” VWware said “managing networks and network services to support cloud architectures is complex, time consuming,” and the company praised Nicira for its cutting-edge work in boosting the power of data centers.
“Nicira helps customers dramatically improve business velocity and efficiency by transforming how networking works in the cloud era,” Nicira CEO Steve Mullaney said in a statement. “I’m thrilled to be joining forces with VMware to help build the software-defined data center.”
Analyst Trip Chowdhry with Global Equities Research said that while the move provides a way for VWware to broaden its virtualization efforts into software, the price it’s paying for the young company raises troubling questions. He said the offer suggests “that we are in a valuation bubble,” mentioning a previous big-ticket purchase that another valley giant recently announced.
“This purchase is as irrational if not more irrational than Facebook buying Instagram for $1 billion,” Chowdhry said. “VMware should not be throwing shareholders’ hard-earned money at unproven companies with unproven concepts. What’s the business model here? I don’t know, do you?”
Strategically, Chowdhry said, the acquisition does make sense. “But when you pay a billion plus, that tells me you’ve lost your senses,” he said. “And that’s very scary.”
The Associated Press contributed to this report. Contact Patrick May at 408-920-5689; follow him at Twitter.com/patmaymerc.
Coming back to this latest acquisition.. All these terms like Cloud, Virtualization, SDN (Software Defined Networks) etc.. are really hot as of now.. I see this acquisition more of extension of the hype surrounding these terms.. SDN is great concept and in my view has great potential.. So is NVP (Network Virtualization Platform) which is already foundation of existing Virtualized Data Center. But SDN is more or less in infancy and key thing there is execution and marriage of software and generic enough hardware. NVP alone is not going to be big enough driver to change the game. Current VMware and other companies' products work fairly well already.
My point is... One Billion Dollars is lot of money.. What ever Nicira has done so far can be easily done (execution) with couple of hundred million dollars of investment or development in even big companies like VMware.. I think there is got to be some premium for talent and what is already available vs. being development effort in big company like VMware.. However.. I am still not convinced that it is right thing for VMware shareholders. It is more of whims and fancies of Sr. Execs which determines these exorbitant purchasing prices.. These type of acquisitions are the mostly responsible for slower or lethargic growth as these companies mature. There is hardly any accountability.. Nobody will be ever fired if VMware is not able to realize even half of the dollars they had spent. We have seen that in many other companies... actually, for that matter, this is really small amount to be bothered in a company like VMware.. but still, if you look from Share holder's perspective.. it is not change.. In my view they should fix some accountability issues.. also.. explain why and how they need Nicira.. how they are going to realize commercial value out of it..
NETWORKING
VMware to buy Nicira for close to $1.3 billion
By Patrick May
pmay@mercurynews.com
PALO ALTO — The burgeoning field of computer “virtualization,” which enables a single computer to function like multiple machines, took a great leap forward Monday with word that Palo Altobased business software maker VMware was buying computer networking specialist Nicira for nearly $1.3 billion.
With its announcement on the same day it reported second-quarter earnings that beat analysts’ estimates, VMware is making a head-turning bet on a 5-yearold, privately held company, also based in Palo Alto, that raised a relatively paltry sum of $50 million from its early investors.
With its NVP, or network virtualization platform, Nicira (pronounced “nice era”) will ostensibly do for networks what VWware has done for computers — magically create multiple virtual networks that work together in tandem but unleash much more computing power than a single network could ever achieve.
VMware to buy Nicira for close to $1.3 billion
By Patrick May
pmay@mercurynews.com
PALO ALTO — The burgeoning field of computer “virtualization,” which enables a single computer to function like multiple machines, took a great leap forward Monday with word that Palo Altobased business software maker VMware was buying computer networking specialist Nicira for nearly $1.3 billion.
With its announcement on the same day it reported second-quarter earnings that beat analysts’ estimates, VMware is making a head-turning bet on a 5-yearold, privately held company, also based in Palo Alto, that raised a relatively paltry sum of $50 million from its early investors.
With its NVP, or network virtualization platform, Nicira (pronounced “nice era”) will ostensibly do for networks what VWware has done for computers — magically create multiple virtual networks that work together in tandem but unleash much more computing power than a single network could ever achieve.
VMware will pay $1.05 billion in cash, plus assume responsibility for $210 million in stock awards that Nicira had given its employees. The purchase of Nicira, whose early customers include AT&T, eBay, Fidelity Investments and the Japanese telecom giant NTT, means a handsome payoff for its investors, including Andreessen Horowitz, Lightspeed Venture Partners and NEA.
“VMware has led the server virtualization revolution, and we have the opportunity to do the same in data-center and cloud networking,” CEO Paul Maritz said in a statement. “The acquisition of Nicira adds to our portfolio of networking assets and positions VMware to be the industry leader in software-defined networking.”
In a statement that described its efforts with Nicira as creating “the architecture for the cloud,” VWware said “managing networks and network services to support cloud architectures is complex, time consuming,” and the company praised Nicira for its cutting-edge work in boosting the power of data centers.
“Nicira helps customers dramatically improve business velocity and efficiency by transforming how networking works in the cloud era,” Nicira CEO Steve Mullaney said in a statement. “I’m thrilled to be joining forces with VMware to help build the software-defined data center.”
Analyst Trip Chowdhry with Global Equities Research said that while the move provides a way for VWware to broaden its virtualization efforts into software, the price it’s paying for the young company raises troubling questions. He said the offer suggests “that we are in a valuation bubble,” mentioning a previous big-ticket purchase that another valley giant recently announced.
“This purchase is as irrational if not more irrational than Facebook buying Instagram for $1 billion,” Chowdhry said. “VMware should not be throwing shareholders’ hard-earned money at unproven companies with unproven concepts. What’s the business model here? I don’t know, do you?”
Strategically, Chowdhry said, the acquisition does make sense. “But when you pay a billion plus, that tells me you’ve lost your senses,” he said. “And that’s very scary.”
The Associated Press contributed to this report. Contact Patrick May at 408-920-5689; follow him at Twitter.com/patmaymerc.
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