Cisco's stake in Parallels ramps up rivalry with VMware

Cisco's investment in virtualization and cloud firm also offers direct response to VMware's networking encroachment

Cisco recently announced it has purchased a 1 percent stake in Parallels, a virtualization and cloud services company. In the virtualization world, Parallels is perhaps best known for its desktop virtualization software on a Windows PC or a Mac computer, which allows a user to simultaneously run Linux, Windows, or Mac OS X operating systems and applications on a single machine without having to reboot.

No financial details were disclosed in the official announcement; however, the company insisted the investment would not preclude Parallels from a possible future initial public offering. As part of this new investment, Cisco will get a seat on Parallels' board of directors. That, in itself, might be enough of a wake-up call to VMware.

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The investment is an interesting move for Cisco, with a lot of implications. It shows that Cisco firmly believes in Parallels' overall offering. Beyond its desktop virtualization technology, Parallels offers its Parallels Cloud Server solution made up of the company's Cloud Storage technology with Parallels Container and Parallels Hypervisor. The technologies are primary aimed at hosting companies -- an area where Parallels has enjoyed much success, allowing hosting providers with containers to easily and more cheaply deliver Windows Web servers to multiple clients.

Parallels has also seen success within the small-to-midsized businesses, both great markets for Cisco to expand its presence into by selling its own brand of servers, networking, and WAN optimization equipment.

"Parallels is committed to enabling our service provider customers to offer the most comprehensive, seamless and flexible set of cloud services for their SMB end-users," said Birger Steen, CEO of Parallels.

"By strengthening our collaboration with Cisco, Parallels is focused on accelerating its growth and offering an end-to-end solution for cloud service providers," he added.

Cisco and VMware have been close partners for many years, with Cisco relying heavily on VMware's virtualization and cloud software, as well as storage products from VMware's parent company, EMC. The three have been collaborating on a successful joint venture known as VCE, which sells a popular data-center-in-a-box called a Vblock, providing customers with a complete hardware and software solution stack that eases the process of virtualizing the data center. But more recently, there have been signs of a slight fracture in that relationship.

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