VMware has agreed to acquire software-defined networking (SDN)/network virtualization provider Nicira for $1.05 billion in cash plus about $210 million of assumed unvested equity awards.

“VMware has led the server virtualization revolution, and we have the opportunity to do the same in datacenter and cloud networking,” said VMware CEO Paul Maritz. “The acquisition of Nicira adds to our portfolio of networking assets and positions VMware to be the industry leader in software-defined networking.”

Nicira CEO Steve Mullaney says, “Nicira helps customers dramatically improve business velocity and efficiency by transforming how networking works in the Cloud era. I’m thrilled to be joining forces with VMware to help build the software-defined datacenter.”

VMware CTO Steve Herrod talks about the acquisition on the company’s blog:

Cloud computing is about agile, elastic, efficient, and reliable services, and it can only be achieved through intelligent software that abstracts out hardware resources, pools it into aggregate capacity, enabling automation to safely and efficiently dole it out as needed by applications.

Tenants or customers utilizing the software-defined datacenter can have their own virtual datacenter with an isolated collection of all the compute, storage, networking, and security resources that they are used to. Furthermore, this virtual datacenter can grow and shrink to efficiently utilize physical resources. But most importantly, the time to deploy these resources can be orders of magnitude faster than in most of today’s IT environments. This is what the software-defined datacenter is all about, and it is the architecture for the cloud. This acquisition advances our software-defined datacenter strategy.

The acquisition is expected to close during the second half of the year, and is pending regulatory approvals. It’s already been approved by both boards.