Cisco Makes Data Center Play With Stake In Nuova

Cisco Systems has created a new subsidiary by taking a majority stake in Nuova Systems, a Santa Clara, Calif.-based startup founded by former Cisco executives.

Cisco announced the move late Thursday. Nuova technology will complement Cisco's data-center product portfolio, which includes Catalyst 6500 switches, MDS storage switches, SFS server networking switches and application acceleration offerings.

San Jose, Calif.-based Cisco has committed technology plus $50 million in funding to Nuova, gaining an 80 percent ownership share of the company. Nuova's founders include former Cisco Chief Development Officer Mario Mazzola. Cisco could contribute up to $42 million in additional funding in the future.

The remaining 20 percent interest will be held by Nuova employees. The company has 76 employees.

As part of the agreement, Cisco has the option to purchase the remaining interest in the Nuova subsidiary in late fiscal year 2008 or early fiscal year 2009, with a minimum potential payout of $10 million and a maximum payout of $578 million, according to the company.