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VMware to Acquire VeloCloud, Doubling Down on Networking

VMware has struck a deal to acquire software-based networking startup VeloCloud Networks, according to a person close to VeloCloud, in a move that is likely to escalate VMware’s rivalry with Cisco Systems. Terms of the deal couldn’t be learned.

For VMware, a data center software company, acquiring VeloCloud is a sign of its commitment to becoming a major networking player. VeloCloud’s technology, known as software-defined wide-area networking (SD-WAN), routes traffic to ensure that applications including voice and video running in data centers deliver sufficient performance when users access them from a company’s branch offices.

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VMware has had success so far in networking. NSX, the product that emerged from the Nicira acquisition, reached a $1 billion annualized run rate at the end of last year, VMware CEO Pat Gelsinger said in January. NSX poses a threat to Cisco because NSX runs on unbranded switches that are less expensive than the ones Cisco sells.

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