VMware buys Nicira

Nicira was founded by Stanford University researchers Martin Casado and Nick MeKeown and University of California at Berkeley researcher Scott Shenker, and is backed by Andreessen Horowitz, Lightspeed Venture Partners and New Enterprise Associates. Diane Greene, co-founder and former CEO of VMware, and Andy Rachleff, co-founder of Benchmark Capital, are individual investors in Nicira.

VMware will pay $1.05 billion in cash and $210 million of assumed unvested equity awards for Nicira, a Palo Alto, Calif.-based startup that has lured high profile talent away from Juniper and Cisco (NSDQ:CSCO), including Alan Cohen, Cisco’s former vice president for enterprise and public sector, who is vice president of marketing at Nicira.

Networking giant Cisco (NSDQ:CSCO), who today announced layoffs, will be watching this development very closely, you can be sure.