Sources: Cisco And Nutanix Talking About Hyper-Convergence Partnership, But Details Not Yet Finalized

Cisco Systems and hyper-convergence startup Nutanix are actively talking about forming a strategic partnership, but the two sides are still working out engineering details and other terms of the relationship, sources familiar with the talks said Tuesday.

Sources said the Cisco-Nutanix partnership won't be announced at the startup's customer conference later this month, as has been speculated. If finalized, the partnership likely won't be revealed publicly until the end of September at the earliest, according to a source with knowledge of Nutanix's plans.

CRN first reported in May that Cisco and Nutanix were talking about a strategic partnership in which channel partners from both vendors would sell Cisco Unified Computing System (UCS) servers with integrated hyper-convergence software from Nutanix.

[Related: Cisco In Talks With IPO-Bound Nutanix About Strategic Hyper-Convergence Partnership]

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But sources said Tuesday that the partnership also involves integration of Cisco's software-defined networking -- known as Application Centric Infrastructure (ACI) -- with Nutanix's hyper-convergence technology.

Nutanix is one of around 50 ecosystem partners working with Cisco on ACI, and it already supports VMware's NSX software-defined networking technology.

Sources said a Cisco-Nutanix partnership would likely cause Cisco to alter its marketing for HyperFlex, its hyper-convergence offering, which has been largely focused on the deficiencies of Nutanix.

One source familiar with the partnership talks said the vendors have tested Nutanix software on Cisco's UCS C260 M2 Rack Server.

Cisco is discontinuing sales of its UCS M-Series modular server line, Frank Palumbo, senior vice president of global data center sales, announced in an email to employees earlier this month.

For the time being, neither vendor is acknowledging the partnership talks. "There is no truth to the rumor. Nutanix remains committed to its existing OEM partners Dell and Lenovo," a Nutanix spokeswoman said in an email. Cisco didn't respond to a request for comment.

Nutanix is the top-funded startup in the market for hyper-converged infrastructure, which describes the combination of compute, storage, networking and virtualization running on x86 hardware.

Nutanix has raised more than $312 million in venture funding since its founding in 2009, and it filed for an IPO in December. But earlier this month Nutanix took a $75 million loan from Goldman Sachs, one of its investors and its lead IPO adviser.

Some industry watchers interpreted the loan as a way for Nutanix -- which already reportedly delayed its IPO in January -- to wait for more favorable market conditions to go public.

There are partners on both sides that believe the Cisco-Nutanix partnership may be a prelude to an acquisition. As CRN reported in March, Cisco made a $4 billion bid to acquire Nutanix in the first half of last year, but Nutanix asked for $6 billion and the two sides couldn't come to terms.

"Cisco could pay a premium and buy Nutanix -- they have plenty of cash to do it," said one executive with a partner of both vendors. "But I don't think Nutanix will sell now. They can double their market cap easily in the next 18 to 24 months and wait out the IPO market."

Editor's Note: A previous version of this article incorrectly identified the server model being tested by Cisco and Nutanix as the UCS B230 M2 Blade Server. It is actually the UCS C260 M2 Rack Server. We regret the error.