Andiamo Crew Reunites With Cisco

Former Cisco Systems Inc. (Nasdaq: CSCO) spin-in exec Mario Mazzola is back in the fold -- or 80 percent there, anyway.

Late yesterday, Cisco announced it's taken 80 percent ownership of Nuova Systems, the startup founded by Mazzola, Luca Cafiero, Prem Jain, and Soni Jiandani -- a quartet of former Cisco executives who left the company just more than a year ago. (See Cisco Funds Nuova and Cisco Names Data Chief.)

They left to found Nuova, apparently, and the project has been a source of Silicon Valley buzz ever since. Now up to 76 employees, Nuova was funded by its founders and reportedly turned down all venture capital offers. (See Cisco/Andiamo Vets Try Something 'Nuova'.)

Mazzola and company have done this sort of thing before, sort of. They were at the helm of Andiamo Systems, a storage switching company that was an explicit "spin-in" -- that is, Cisco nurtured the company with the intention of acquiring it. (See Ciscos Secret SAN Strategies Revealed, Cisco Owns Up to Andiamo, and Cisco Buys Andiamo Finally.)

That wasn't the case this time. "They funded the company independently," a Cisco spokesman says, noting the execs didn't leave Cisco knowing they'd get acquired back in. "Subsequently after the formation, they talked with Cisco, and then this deal came about," the spokesman says.Nuova's product still isn't being revealed, but Cisco notes it's a data center technology that's complementary to routers, storage switches, and server networking -- meaning, it's not replacing anything in Cisco's lineup.

The going theory is that Nuova is working on virtualization, a way of controlling traffic in order to better utilize server resources. It's a popular topic among startups. (See Virtualization Startups Gain Steam.)

There's at least some MPLS know-how inside the company. A Nuova employee helped write a July 2006 Internet Engineering Task Force (IETF) draft, "A Framework for Inter-Domain Multiprotocol Label Switching."

Cisco is giving Nuova $50 million and possibly another $42 million, presumably dependent on performance. Nuova becomes a majority-owned subsidiary of Cisco.

Cisco has an option to purchase the 20 percent of Nuova it doesn't own, a deal that would happen in late fiscal 2008 or early fiscal 2009, according to Cisco's press release. (Cisco's fiscal year ends in July.) "The potential payouts made under the call option are primarily based on the success of Nuova Systems' products sold through Cisco, with a minimum potential payout of $10 million and a maximum total payout of $578 million," the release says.— Craig Matsumoto, Senior Editor, Light Reading