Cisco Chomps FineGround

In a surprise move, Cisco bypasses other WAN optimization startups to pick up FineGround for $70M UPDATED 1 PM

May 26, 2005

3 Min Read
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Cisco Systems Inc. (Nasdaq: CSCO) will fork out $70 million in cash and options to buy FineGround Networks, a wide-area file services (WAFS) and application optimization vendor based in Campbell, Calif. (see Cisco to Buy FineGround).

FineGround was founded in 2000 and is privately held, with about $21 million in funding, primarily from New Enterprise Associates (NEA) and WorldView Technology Partners. Its recently released flagship product is the Velocity-FS, an appliance that sits in the data center and accelerates Web-based application performance over IP networks, without any remote agents required (see FineGround Wades Into WAFS). It claims 12 patents on technology it says improves application response time two to five times for remote sites.

FineGround says it has more than 100 enterprise deployments and claims Alcoa, BMW, Cargill, Royal Mail, Sun Microsystems, Walgreens, and Whirlpool as customers.

The deal is another jawbreaker in a feeding frenzy that has WAFS and WAN optimization suppliers jostling for selection by large IT infrastructure players (see Remote Site Rapprochement). It's been less than a month since Juniper Networks Inc. (Nasdaq: JNPR) declared it would buy Peribit Networks Inc. for $337 million (see Peribit Deal: More to Come). And it's just days since SAN switch vendor Brocade Communications Systems Inc. (Nasdaq: BRCD) declared its investment in Tacit Networks Inc., and Hewlett-Packard Co. (NYSE: HPQ) announced a resale arrangement with Riverbed Technology Inc. (see HP in Deal With Riverbed, Sources Say).

Cisco's move is both expected and surprising. Though Cisco publicly states that it's happy with the WAFS technology it acquired with the purchase of Actona for $82 million in cash last year, there have been persistent rumors that Cisco's not content (see Cisco Acts on Actona). But sources thought the vendor would move to add a vendor with more of a transport optimization background (see Cisco Prowling WAN Optimization?). Instead, Cisco opted for another vendor with an upper-layer WAFS-oriented solution.One thing: FineGround's single-appliance approach may have played in its favor. At least one user has voiced concern about the addition of WAFS or WAN optimization directly onto Cisco routers. According to Eric Klinker, vice president of engineering at service provider Internap Network Services Corp. (Nasdaq: INAP), Cisco's tried to add this kind of software to routers in the past, with little success. Its choice of FineGround could be interpreted as a concession to the need for a separate device that still doesn't require a load of agents or machinery at remote sites.

Cisco's buy could also signal dissatisfaction with its Actona progress. "You might read that into it," Klinker agrees.

If Cisco's not happy with Actona, it's not saying. It is playing the FineGround buy as an addition, not a replacement, to its roster of technologies. Cisco continues to sell Actona as a standalone product and plans to integrate it with routers at a future time. "There are no plans to change Actona development," says Cisco spokesman Robert Barlow. "We are very pleased with how that's going."

Exactly how FineGround's technology will be integrated into Cisco's lineup, though, hasn't been decided, Barlow says. FineGround will join Cisco's Security Technology Group, and FineGround's CEO Nat Kausik will stay in place as the startup's team leader. Actona, in contrast, is part of Cisco's Routing Technology Group.

FineGround has 42 employees. After the acquisition, which Cisco hopes will close by July 30, a typical evaluation will follow to eliminate overlap. But Barlow says the plan is to keep as many employees as possible and move them to Cisco's facilities.Mary Jander, Site Editor, Byte and Switch

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