In what clearly is a strategic move in the direction of software-defined networking, VMware revealed in a July 23 announcement that it is making a $1.26 billion payment - $1.05 billion in cash; and $210 million in unvested equity - for acquiring SDN software maker Nicira.

VMware's acquisition of Nicira - a transaction which will likely close early next quarter, after due regulatory approval - comes within six months of Nicira announced its emergence from stealth mode earlier this year.

The software developed by Nicira is already being used by bigwig companies - including the likes of AT&T, eBay, Japanese telecom NTT, and financial giant Fidelity - and the technology underlying the Nicira network controller has greatly influenced well-known web companies like Google.

The acquisition of Nicira by VMware is a notable move, especially since VMware has - over the past few months - been pushing the proposition of the so-called "software-defined data center," where storage and networking are virtualized as well as servers.

With VMware chiefly helping big businesses save money as well as space by slotting many virtual machines onto a single physical server, Steve Herrod - VMware's chief technology officer - told Wired that "software-defined data center" is evidently the architecture for the cloud, and, from the VMware perspective, it is "a multibillion-dollar opportunity."

Noting that since networking is "central" to "software-defined data center", Herrod said that the acquisition of Nicira not only accelerates VMware's vision, but also "complements a lot of work we've done so far on this overall mission."