Cisco Systems plans to acquire a 1.6 percent equity stake in virtualisation software player VMware, mirroring a step Intel took earlier this month.
The investment is part of an upcoming initial public offering (IPO) of 10 percent of VMware's stock.
Cisco said it plans to buy US$150 million of VMware Class A common shares, which are owned at present by EMC, VMware's parent company. The move is subject to regulatory and other closing conditions. Once the investment has been made, Cisco will own around 1.6 percent of VMware's total outstanding common stock. According to an updated VMware S-1 filing with the U.S. Securities and Exchange Commission, Cisco will buy six million shares, valuing each VMware share at $25.
VMware is considering whether it will appoint a Cisco executive to its board of directors.
Cisco hopes taking a stake in VMware will help bring two companies closer together and result in more users adopting VMware virtualisation software and Cisco networking products. Cisco and VMware also announced they've agreed to collaborate on joint development and marketing.
EMC acquired VMware in January 2004 for $625 million and has run the company as a separate software subsidiary headed by Diane Greene, VMware's former president and CEO.