Cisco Acquires Nuova Systems and Unveils New Switch

Nexus 5000 Series - the 10-gigabit Ethernet switching technology

Cisco Systems has unveiled the Nexus 5000 Series, a 10-gigabit Ethernet switching technology based on the one of Nuova Systems, a company that Cisco announced it would acquire. A majority interest in the startup from Silicon Valley was already held by Cisco and, according to John Chambers, Cisco CEO, the Nuova Systems spin-in provides a better acquisition model. Through the Nexus 5000 Series, network traffic will be combined into a unified "data-center fabric."

John Chambers also stated that Cisco's internal engineering group, combined with the engineering team and Ethernet switching technology from Nuova Systems, would give great help to enterprises in transforming data -center operations. "In the case of Nuova Systems, the advantage of a spin-in is that you can jointly develop well-integrated products by closely sharing your technology, expertise and product road maps," were Chambers' words. "The acquired technologies of a spin-in become part of Cisco's technology architecture in a much shorter time than with traditional acquisition methods," he also added.

The purpose of Nexus 5000 Series is the consolidation of local-area network, iSCSI-based storage-area network, Fiber Channel and server cluster traffic onto Ethernet-based "data-center fabric." The new 10-gigabit Ethernet switch family featuring line-rate and low latency is expected to help IT managers deal with the fast growing input/output demands of virtualized environments and multi-core processors. Cisco also noted that there would be a great improvement in the way servers communicate and share resources through a unified fabric for the technology, hardware and software infrastructure in data centers. This way, a simplification of the cabling infrastructure, along with reducing the number of adapters, much lower power consumption and a reduced carbon footprint will also be possible, according to Cisco.

Savvis, an IT utility-services provider, also believes that there will be great benefits coming from a unified fabric. These benefits include "the ability to provide our customers with a higher quality of service as well as total cost-of-ownership reduction within our data-center operations," as Savvis CTO Bryan Doerr said.

Cisco helped Nuova Systems launch and sees other benefits from its acquisition. "The Nexus 5000 is just the first product in a rich technology portfolio that the Nuova team has been developing," Chambers said. "While I cannot preannounce other products, I can say without hesitation that I expect the Nuova acquisition to have a profound influence on our data-center business." To "build, buy and partner" has always been Cisco's business model, Chamber said. He also added that only with internal innovation it is almost impossible for a company to lead an industry. On the other hand, Cisco is able to tie an acquisition price to product revenues through the spin-in method. The margins associated with those revenues are in the same situation as well.

"This results-oriented approach avoids the typical challenges of estimating the value of an acquisition," Chambers said. "This, to me, has the potential to be a superior way of doing acquisitions." Depending on the revenues and margins generated for Cisco by Nuova's products, the final purchase price is uncertain. Cisco System said that the company may be on the position of paying somewhere between $10 million to $678 million for Nuova.

Cisco technologies like the Nexus operating system, are employed in Nuova's 10-gigabit Ethernet switching technology, this being the first accomplishment from the acquisition. The Nexus 5000 Series will be released next month with a price tag starting at $36,000.

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