Cisco takes stake in data center firm Nuova

Networking equipment maker Cisco Systems announced Thursday that it has taken an 80 percent stake in Silicon Valley start-up Nuova Systems.

Cisco said it has committed $50 million to the data center firm and, depending on the company's performance, could shell out an additional $42 million in funding.

Nuova Systems will become a majority-owned subsidiary of Cisco. The remaining 20 percent of the company will be held by Nuova's employees.

Cisco has the option to buy the remaining 20 percent of the subsidiary, which could happen sometime in late fiscal year 2008 or early fiscal 2009, the company said. Depending on the success of Nuova's products sold through Cisco, the payout for the remaining 20 percent stake could be anywhere between $10 million and $578 million, Cisco said.

The deal reunites former Cisco executives with their old employer. Mario Mazzola, former chief development officer at Cisco, helped start Nuova after his retirement in 2005. Mazzola was joined as a co-founder of Nuova by three other former Cisco executives--Luca Cafiero, Prem Jain and Soni Jiandani--all of whom came to Cisco back in 2002 as part of an investment-turned-acquisition. Cafiero, Jain and Jiandani had all been at Andiamo Systems, a company Cisco had invested in and later bought in 2002.

Nuova hasn't yet announced a product, but Cisco said in a press release that its technology will complement Cisco's current portfolio of products for corporate data centers. Those products include the Catalyst 6500, an Ethernet switching and Internet Protocol routing product; the MDS line of storage switches; and the SFS server networking switches.