Cisco acquires Nuova Systems to create data centre subsidiary

11 August 2006

Mumbai: Cisco Systems Inc. has invested $50 million in Nuova Systems Inc. to set up a next-generation data centre for product development. The investment makes Nuova Systems a majority-owned subsidiary of Cisco.

Cisco has committed technology support and $50 million of funding to Nuova Systems with the possibility of an additional $42 million funding in the future. The subsidiary will be approximately 80 per cent owned by Cisco, with the remaining 20 per cent stake held by employees of the subsidiary.

Starting fiscal 2007, Cisco, with its majority ownership interest in the subsidiary, will consolidate its accounts as well.

Nuova Systems' product development efforts will complement Cisco's current data centre product portfolio. Nuova Systems, founded by former Cisco executive Mario Mazzola, has 76 employees and is based in Santa Clara, California.

Cisco has the option to purchase the remaining 20 per cent stake in the subsidiary. Should Cisco decide to exercise this option, the transaction would occur in late fiscal year 2008 or early fiscal year 2009. The call option, with a minimum potential payout of $10 million and a maximum total payout of $578 million, will rest on the success of Nuova Systems' products sold through Cisco.

Cisco Systems is the world leader in networking for the internet. Cisco has been a leader in the development of internet protocol (IP)-based networking technologies. With more than 47,000 employees worldwide, Cisco offers products and solutions in the company's core development areas of routing and switching, as well as in advanced technologies such as IP communications, wireless LAN, home networking, application networking services, network security, storage area network and video systems.