Report: Cisco Planning To Acquire Startup Nutanix In Hyper-Converged Blockbuster

Cisco Systems is planning to acquire hyper-converged infrastructure startup Nutanix and may announce a deal as soon as next month, according to a report Friday from Storagenewsletter.com.

The report -- written by Jared Rinderer, senior research analyst at Equity Capital Research Group, a Portland, Ore.-based independent equity research firm -- claims that Cisco CEO John Chambers wants to make one more big acquisition before he steps down in July.

Acquiring Nutanix would not only give Cisco the top hyper-converged offering on the market, but it would also be a competitive coup against rivals EMC and VMware, said Rinderer in the report.

[Related: What's Next For Nutanix, Darling Of The Red-Hot Hyper-Converged Infrastructure Market?]

Cisco has around $50 billion in cash parked overseas, and only around $3 billion in the U.S., according to Moody's Investors Service. That means it would need to issue debt in order to pull off an acquisition of Nutanix, Rinderer said in the report.

Rinderer also said a Cisco acquisition of Nutanix may be announced at the startup's customer and partner conference, set for June 8-11 in Miami.

The report doesn't cite industry sources or provide any other corroborating information. But Rinderer told CRN in an email that his information comes "from my research and industry contacts."

Both Cisco and Nutanix declined to comment on the report.

If true, this would be a blockbuster move by Cisco to catapult itself into a leading position in the hyper-converged market, which refers to products that combine compute, storage, networking and virtualization running on x86 server hardware.

Such a deal would also have competitive ramifications for other industry vendors. Nutanix has an OEM agreement with Dell, which is going hard after Cisco's data center business. Cisco has a partnership with SimpliVity to sell the startup's hyper-converged software and hardware card on UCS servers.

Nutanix, which has raised more than $312 million in venture funding, and had a $2 billion valuation after its latest round last August, has given its channel partners every indication that it intends to do an initial public offering. Sources told CRN this week that Nutanix may file its S-1 as soon as this month.

CRN spoke with five partners that work with both Cisco and Nutanix on Friday, and none was inclined to give any credence to Rinderer's report.

That said, the partners told CRN they think Cisco would benefit greatly from bringing Nutanix into the fold. Cisco is one of the last big enterprise vendors that doesn't have a hyper-converged offering of its own, and its partners are eager to see it fill this gap.

Some of the partners also said Cisco field sales has not been pleased when they lead with Nutanix in enterprise deals instead of UCS, or in smaller-business-focused deals with Cisco's UCS Mini offering.

"If Cisco makes this happen, we’d all be in favor of it, as it would eliminate the channel conflict we see in this space at a field level," one partner told CRN.

Industry analysts have also been expecting Cisco, which reported fiscal third-quarter earnings Wednesday, to build its security portfolio via acquisition.

Earlier this week, Cisco was rumored to have made a $9 billion bid to acquire security vendor FireEye, but Chambers all but dismissed the possibility in a Q&A with Wall Street analysts during the earnings call.

PUBLISHED MAY 15, 2015