E-Commerce News: News: Cisco Buys Topspin for $250 Million

"As customers look to re-architect their data centers, they're looking at new network technologies. This gives Cisco another option for those customers," said IDC's Lucinda Borovick. She said that given the value of solidifying its position with those data center customers, the deal is a good one for Cisco.

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Cisco Systems (Nasdaq: CSCO) announced today it will buy Topspin Communications, a maker of programmable server switches, for US$250 million in cash and options.

The acquisition gives Cisco, which now has only Ethernet offerings, an entry into the InfiniBand data transition architecture market.

Growing Market

Topspin's switches are used in data applications, storage and computer networking. The data center network market grew 10 percent from 2003 to 2004, according to IDC. "Cisco is very serious about being a key supplier to the data center," Lucinda Borovick, program director, data center networks, IDC, told TechNewsWorld.

"As customers look to re-architect their data centers, they're looking at new network technologies. This gives Cisco another option for those customers." She said that given the value of solidifying its position with those data center customers, the deal is a good one for Cisco.

Borovick also said that Cisco is looking to leverage Topspin's Vframe virtualization technology. VFrame is a management software suite for its switches that works either on its own or along with the management software of other vendors.

"I suspect that the value to Cisco is really more about the virtualization technology. I suspect that Cisco will take the virtualization technology and blow it out [into other areas]," she said.

Backing InfiniBand

The acquisition also gives at least a temporary boost to InfiniBand, which has been gaining ground, especially in companies looking to create a unified storage strategy, Borovick said.

"It immediately gives credibility to InfiniBand, although you have to wonder how serious has Cisco been about any technology except Ethernet? What's the long-term prognosis?"

InfiniBand is attractive because of its low latency and high performance ability at a cost that's lower than gigabit Ethernet. The reluctance to add another architecture into a data center is the biggest hindrance to its adoption.

Topspin CEO Krish Ramakrishnan has found himself working for Cisco before. In 1995, he sold Internet Junction, which he co-founded, to Cisco and became vice president and general manager of Cisco's Content Business Unit. The deal, expected to be finalized by July 30 pending regulatory approval, brings 135 employees to Cisco's Data Center, Switching and Wireless Technology Group.