Cisco today said it completed the purchase of Nuova Systems, a data center switch start-up funded by Cisco to develop a top-of-rack device with a converged fabric. Cisco made its initial investment of $70 million in Nuova in August 2006. That stake was good for 80% owenership of the company, and Nuova operated as a majority-owned subsidiary of Cisco.

In conjunction with the investment, the companies entered into a call-option agreement, which gave Cisco the right to purchase the remaining 20% of Nuova stock. On April 8, Cisco did just that; it also rolled out the Nuova-developed Nexus 5000 switch, designed for data center consolidation through a unified switching fabric that supports Fibre Channel over Ethernet, lossless Data Center Ethernet and virtualization technologies.

The Nexus 5000, along with the Nexus 7000 core data center switch, is a key component of Cisco's Data Center 3.0 vision of enabling IT organizations to dynamically provision application and infrastructure services from shared pools of consolidated compute, storage, and network resources.

The final purchase price for Nuova will be primarily determined by the revenue of Nuova products over three measurement periods: early fiscal year 2010; late fiscal year 2010; and mid-fiscal year 2011. The minimum payout will be $10 million; maximum payout will be $678 million.

Cisco reiterated that Nuova will operate as an independent business unit led by founders Luca Cafiero, Prem Jain and Mario Mazzola.

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