VMWare’s $1.26 billion bid was a flashback to the heady days of the dotcom boom when companies could not buy their way into emerging communications markets quickly enough.
In his blog, Horowitz justified the deal, saying the money buys VMWare entry to a $37 billion data networking market. Interestingly, one of the advisors on the deal was Frank Quattrone of Qatalyst Partners LLC who helped construct some of the big dotcom deals.
Market watchers are already describing the SDN opportunity with B words. International Data Corp. said the market for SDN products will grow from about $100 million this year to $2 billion by 2016.
Dell’Oro Group analyst Casey Quillin topped that figure estimating a $2.6 billion SDN market by 2016 in a report released last week, noting the sector’s “almost legendary rise.” Part of that value is new products and part is existing value now in traditional routers and switches shifting to new SDN servers, he said.
3. The cloud discount
VMWare needs to add the big cloud computing data centers to its customer list for growth beyond its core market in enterprise virtualization. But to date the company lacked support for some of the key open source platforms such as KVM and Citrix Xen many of those customers use.
With the Nicira deal, VMWare now has support for OpenStack, one of the main open source server virtualization platforms. So cloud computing, as much as SDN, is responsible for the high value of the deal. At least that’s the theory from one networking executive who asked to remain anonymous.
4. So who’s next?
“I view this acquisition as the first of many to come,” said Shehzad Merchant, vice president of technology at switch maker Extreme Networks, speaking on a NetEvents panel.
Market watcher Nick Lippis cribbed the field in an online analysis. Citrix, IBM, Microsoft and Red Hat are among the most likely suitors. The biggest target is Big Switch Networks, the other independent SDN controller maker to emerge from the Stanford project. Startup Embrane is another possible buy for its distributed platform for providing virtual network services, as are two stealth-mode companies—Pluribus and Plexxi, he said.