For $1.26bn, VMWare Buys a Chance to Reinvent the Internet

Cloud computing pioneer VMware has paid $1.26 billion for Nicira, a startup that we featured in our March list of the 50 most innovative companies in the world (see our feature article “A New Net”), and a pioneer in a new market known as “software defined networking.”

Nicira’s technology is an attempt to rethink the basics of how computers connect to one another in an era when Internet software rules. The company is the brainchild of Stanford PhD research Martìn Casado, who says he became frustrated by the way even the most powerful software has to be connected to networks made up of equipment that can’t be reconfigured easily, and generally act independently. Nicira hides that inflexibility beneath a centrally coordinated, simulated network. The company’s technology is pitched at the operators of giant data centers as a way to more easily manage, scale up, and move around their giant software systems. Early customers include eBay and Fidelity.

The purchase ($1.05 billion in cash and the rest in stock) is a smart buy for VMware. After five years working on its technology in stealth mode, Nicira was already ahead of younger efforts in the same vein, from other startups as well as established giants such as VMware and Cisco. Now hitched to VMware, Casado’s ideas should be able to go further, faster.