Cisco this week announced plans to fully acquire a switch start-up it funded and also unveiled the newest member of its data center switching line, developed by Cisco and that start-up.

At its Partner Summit conference in Honolulu, Cisco introduced the Nexus 5000 series switch, which was a collaborative development between Cisco and Nuova Systems. In August 2006, Cisco paid US$50 million to acquire an 80 percent stake in Nuova Systems. This week it acquired the remaining 20 percent stake in Nuova, which was founded by several ex-Cisco switching executives, for US$20 million.

The maximum potential payout for Nuova could reach US$678 million based on the revenue of Nuova products over three measurement periods. The first measurement period will be in early in Cisco's fiscal year 2010, the second measurement in late fiscal year 2010, and the third in mid fiscal year 2011.

Nuova was founded by former Cisco executives Luca Cafiero, Prem Jain, Soni Jiandani and Mario Mazzola. Founders also include Ed Bugnion, a co-founder of VMware, and Tom Lyon, a co-founder of IP switching pioneer Ipsilon Networks and a former Sun executive.

All six founders and the company's approximately 200 employees in San Jose and in Beaverton are expected to join Cisco to continue working on data center-related projects. Nuova will operate as an independent business unit led by Cafiero, Jain and Mazzola, who will all report to Cisco CEO John Chambers.

In addition, Jain has been appointed the ninth member of Cisco's Development Organization, a council of Cisco executives charged with aligning the company development priorities.

The acquisition is expected to close in the fourth quarter of Cisco's fiscal year 2008. It will be Cisco's 126th acquisition overall and the fifth one in fiscal 2008.

The switch the companies co-developed is called the Nexus 5000. It is a "top of rack" switch designed for data center consolidation through a unified switching fabric that supports Fibre Channel over Ethernet (FCoE), Data Center Ethernet and virtualization technologies.

The Nexus 5000 runs the same NX-OS operating systems as Cisco's Nexus 7000 core data center switch, which debuted in January. It can connect to that switch, to the Cisco Catalyst 6500 in the aggregation/core layers of the data center, and to the Cisco MDS 9000 storage-area network (SAN) switches through its native Fibre Channel interfaces.

These connectivity options help customers consolidate I/O in the access layer, while maintaining investments in the aggregation and core layers, Cisco says.

FCoE support allows the Nexus 5000 to consolidate LAN, Fibre Channel and iSCSI-based SANs and server cluster traffic onto an Ethernet-based unified fabric, Cisco says. The Nexus 5000 also supports virtual machine capabilities, which allow IT organizations to dynamically provision application and infrastructure services from shared pools of compute, storage and network resources.

Partners supporting the Nexus 5000 include 3PAR Data, APC, Broadcom, Dell, EMC, Emulex, Intel, NetApp, Netxen, Panduit, QLogic, Scalent and VMware. They are developing products that interoperate with the new switch, Cisco says.

The Cisco Nexus 5000 Series is scheduled to be available in May. Pricing starts at US$36,000 for the fixed configuration 40-port 10 Gigabit Ethernet switch.