I wrote a detailed look into the economics of the Nuova Systems and Cisco "M&A" deal (way back in October 2006) in the article: Nuova Systems & Cisco: New Corporate VC Model? Many thanks to my friend Tom Lyon for giving me an early look into what the Nuova Systems folks were up to. And congratulations to the team for completing this deal!
Fast-forward to today (April 2008) and we find that Cisco has announced that they will acquire the remaining 20% of Nuova Systems, as per their original deal. I missed it, but apparently the two firms renegotiated the deal in April 2007 in Nuova Systems' favor "and raised the maximum potential payout of the transaction to $678 million". It was originally set to $578M. The latest announcement included additional information about the milestones of the payout:
The Nuova transaction is success-based with the total value primarily determined by the revenue of Nuova products over three measurement periods. The first measurement period will commence in early fiscal year 2010, the second measurement period will commence in late fiscal year 2010, and the third measurement period will commence in mid fiscal year 2011.
As I mentioned in my original article, I really do like this "Corporate VC"-ish model that they have created with the structure of this deal.
Everybody wins, and risk is dramatically reduced. Hats off to Cisco's Business Development group.
I look forward to hearing more details about the payouts, as the milestones tick by (and the success of the Cisco Nexus 5000 Series).
Final note from their announcement:
Nuova was founded by Ed Bugnion, Luca Cafiero, Prem Jain, Soni Jiandani, Tom Lyon and Mario Mazzola. Bugnion is a former co-founder of VMware and Lyon formerly founded Ipsilion Networks. Cafiero, Jain, Jiandani and Mazzola are all former Cisco executives. All six founders and the company's approximately 200 employees in San Jose and in Beaverton, OR are expected to join Cisco to continue working on data center-related projects.
Nuova will operate as an independent business unit led by Cafiero, Jain and Mazzola who will all report into John Chambers, Cisco's CEO and chairman. In addition, to help ensure alignment with Cisco's development priorities, Jain has been appointed as the ninth member of the development council in Cisco's Development Organization, joining Tony Bates, Marthin DeBeer, Kathy Hill, Ned Hooper, Pankaj Patel, Don Proctor, Manny Rivelo and Jayshree Ullal.