HONOLULU, Hawaii -- Cisco (NASDAQ: CSCO) today announced its intent to purchase the remaining 20 percent interest in San Jose-based Nuova Systems, a start up focused on the development of next-generation products for the data center market. Cisco today also introduced the Cisco Nexus 5000 Series, the first product developed by Nuova. The Cisco Nexus 5000 is a 10 Gigabit Ethernet "top-of-rack" switch that offers unified fabric capabilities through the support for multiple data center networking protocols and software intelligence (Refer to related press release).
Prior to the acquisition, Nuova operated as a majority-owned subsidiary of Cisco, which had invested $70 million and owned 80 percent of the company. Cisco announced its initial investment in Nuova in August 2006 and announced an amendment to the agreement in April 2007 that expanded the development scope, increased the funding commitment and raised the maximum potential payout of the transaction to $678 million.
The Nuova transaction is success-based with the total value primarily determined by the revenue of Nuova products over three measurement periods. The first measurement period will commence in early fiscal year 2010, the second measurement period will commence in late fiscal year 2010, and the third measurement period will commence in mid fiscal year 2011.
The Cisco investment and Nuova subsidiary structure allowed both companies to collaborate actively in the development of the Cisco Nexus 5000 through technology sharing, product evolution and driving overall market acceptance of innovative data center technologies. As a result the Cisco Nexus 5000 is designed to be fully interoperable with the recently introduced Cisco Nexus 7000 Series switches through the sharing of a common product architecture, operating system and other software intelligence. The Cisco Nexus 7000 is an internally developed, modular data center-class switching system designed for 10 Gigabit Ethernet networks offering industry-leading performance scaling up to 15 terabits per second.
"To succeed in today's marketplace and effectively deliver on our business strategy to capture key market transitions, Cisco drives a combination of internal R&D, industry partnerships and corporate development activities," said Ned Hooper, senior vice president, Corporate Development and Consumer and Small Business Group, Cisco. "In many ways, the efforts supporting our Data Center vision are great examples of this 'build, buy, partner' innovation framework in action."