11/4/2008 -- On the heels of an expanded relationship that they announced only last month, Cisco Systems Inc. and VMware Inc. are looking to get even cozier over time. Late last month, Cisco announced plans to take another stake in VMware -- to the tune of $13.3 million (or 1.7 percent).

Cisco's courting of VMware isn't a new idea. Back in 2007, it staked itself to a $150 million investment in VMware -- just prior to that company's IPO. That gave Cisco a 1.5 percent stake in VMware, as well as a 7 percent share of that company's Class A stock. Last week's $13.3 million stake -- while amounting to just a fraction of the $150 million Cisco ponied up in 2007 -- means that the networking giant now owns close to 8 percent of VMware's Class A stock.

Cisco and VMware kicked their relationship into overdrive last month, at the VMworld conference in Las Vegas. At the time, the partners touted the Nexus 1000V, a virtual switch -- jointly developed by both Cisco and VMware -- that's slated to ship as part of the next revision of VMware's Virtual Infrastructure Suite.

Also at VMworld last month, and also in tandem with VMware, Cisco unveiled its Virtual Network Link (VN-Link), a kind of change management component for virtualized environments. The promise of virtualization, after all, is seamless portability: Administrators can rapidly bring up new virtual engines simply by deploying images (or running virtual machines) to target systems. In such cases, Cisco VN-Link works with VMware's VMotion to ensure that relevant network profile or storage assets are redeployed (or moved) along with VMs.

At the time, VMware officials spun the deal as a great leap forward for a still-gestating virtualization segment. "[T]he Cisco Nexus 1000V and VMware Infrastructure integration...is a key building block in [VMware's] strategy to partner with industry leaders to deliver to customers the deep federated management of physical and virtual server, network and storage infrastructure required in a fully virtualized datacenter," said Brian Byun, vice president of global partners and solutions for VMware, in a statement.

Cisco officials, for their part, said the partnership was all about continuity, chiefly for customers accustomed to managing Cisco gear in their physical datacenter environments. "Integrating the Cisco end-to-end datacenter networking capabilities into the VMware platform is a way for our customers to enjoy the Cisco networking, security and storage services they have benefited from in our networking hardware," said Cisco Vice President Soni Jiandani in a prepared release. "Also, with our expertise in assessment, planning and network design, we will be able to help our customers set up the right policies to gain the benefits of networking virtualization across their business."

That was last month. In the "What Have You Done for Me Lateley?" Department, Cisco this month purchased 500,000 shares of VMware's Class A common stock from Intel Corp. That gives Cisco a 1.7 percent stake in VMware's ownership.

It isn't a case of quid pro quo. Instead, officials say the equity stake helps cement Cisco's nascent partnership with VMware. Call it a significant gesture, of sorts: $13 million is pocket change for Cisco, but on top of the $150 million it has already invested in VMware, Cisco seems to be angling for more of a full-fledged stake.

The prospect of Cisco buying VMware outright has also been floated on several occasions in the past; with VMware posting less-than-stellar earnings in Q1 of 2008 -- and with executive turmoil that lead to the departures of both its CEO and chief scientist in July and September, respectively -- speculation of a Cisco buyout reached a higher pitch. Officials, for their part, downplay such talk, stressing that the move demonstrates Cisco's commitment to collaborate with VMware to help spur the adoption of network-oriented virtualization products. --Stephen Swoyer