Cisco Rumored to Be Interested in Buying Nutanix

By Jeffrey Burt  |  Posted 2015-05-18 Print this article Print
Cisco CEO

An analyst is saying that outgoing Cisco CEO John Chambers wants the startup in the fold to help in his company's growing competition with VMware.

Rumors of acquisitions continue to swirl around Cisco Systems in these final weeks of John Chambers' two decades as CEO of the networking technology giant.

Earlier this month, reports surfaced that Cisco executives were once again looking to buy cyber-security software vendor FireEye to add to its growing portfolio of security solutions. However, Chambers, speaking on a conference call with analysts and journalists May 13 to talk about Cisco's latest quarterly financial numbers, said he was stepping away from tradition and commenting on acquisition rumors.

In a brief response to a question, Chambers said, according to a transcript on Seeking Alpha, that he wouldn't "comment on rumors about acquisitions or not, but I wouldn't bet on the one that you heard today."

Chambers is set to retire July 26 and be replaced by Chuck Robbins, the company's senior vice president of worldwide operations.

In addition, unnamed sources told news site Re/Code that FireEye executives would not consider selling the company until it hits $1 billion in revenue.

Two days later, Jared Rinderer, senior research analyst with Equity Capital Research Group, wrote in a column on the StorageNewsletter site that Cisco is looking to build out its portfolio in the hyperconverged data center market by buying startup Nutanix. The smaller company integrates compute and storage into a single x86-based system that are deployed in scale-out clusters, which officials said not only saves on power and space, but also reduces the complexity associated with storage.

According to Rinderer, buying Nutanix would be a boost for Cisco in its growing competition with former partners EMC and VMware, which began to compete more directly with Cisco when it outbid Cisco for Nicira—a startup in the software-defined networking (SDN) space—and bought the company in 2012 for $1.26 billion. The Nicira technology is the basis for VMware's NSX SDN platform, which officials said has more than 400 customers.

Cisco counters SDN with its Application Centric Infrastructure (ACI), which leverages both Cisco hardware and software to improve workload performance.

"By acquiring Nutanix, Cisco gains a conspirator with a mutual adversary, VMware," wrote Rinderer, who didn't indicate the source of his information. "For more than a year now, VMware and Nutanix have been in numerous, highly-heated, public skirmishes. VMware is threatened by Nutanix's one-stop shop for datacenter infrastructure and its potential to disrupt VMware's objective of the complete automation of the datacenter. Nutanix dislikes VMware's strategy tax (known as the 'vTax') and vendor lock-in agenda."

Nutanix's storage offerings also compete directly with EMC, another Cisco partner that is finding itself in increasing competition with the networking vendor.

The analyst, who called a Nutanix deal "Chamber's last salvo," said he views VMware's EVO:Rail/Rack as a key product in the hyperconverged infrastructure market, followed by such startups as Nutanix, Maxta, SimpliVity, LeftHand Networks (which was bought by Hewlett-Packard) and ScaleIO (bought  by VMware parent company EMC). VMware earlier this month launched the VxRack family of hyperconverged data center solutions.

Rinderer suggested a deal for Nutanix could be announced during the company's user conference, which begins June 8 in Miami.

Nutanix is doing well. Company officials in February reported that Nutanix has a $300 million run rate, about 1,200 customers—50 of which have bought more than $1 million in products from the company—and more than 850 employees. It reportedly has raised more than $312 million, and has a valuation of $2 million.

Cisco officials are not commenting on the report. In a follow-up column May 18, the editors of StorageNewsletter said a spokesperson for Nutanix wrote them a letter calling the headline on Rinderer's column "incredibly misleading," but they said they were standing behind the article.



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