Making power hungry data centers more energy efficient is a big business and Cisco knows it. On Friday Cisco said it will purchase $150 million of the virtualization company VMware’s Class A common shares from VMware’s parent company EMC. Cisco says it will work on developing products for the “intersection of virtualization and networking.”
Palo Alto-based VMware’s software makes servers more efficient, by allowing servers to run more applications on less hardware. That reduces energy consumption and VMware says energy cost savings can be $500-600 per server per year.
VMware has been growing rapidly since EMC bought the company — its revenue last year reached $709 million, up from less than $100 million in its final year as an independent company. Pund-IT analyst Charles King described EMC’s acquisition of VMware to Adena earlier this year as “one of the great homerun acquisitions that has ever happened in IT.” Now that is some major praise.
Intel Capital also said this month that it is would invest $218.5 million in VMware. EMC says it plans to sell approximately 10% of VMware via an initial public offering (IPO) this summer.
When Cisco’s investment is closed Cisco will own roughly 1.6 percent of VMware’s total outstanding common stock and a Cisco executive will likely join VMware’s board of directors.