Street Talk: Cisco's Shopping

4:30 PM -- Cisco has expressed interest in NAS in recent years, and today there were rumblings that it is looking to become a full-blown NAS vendor.

That was the word on Wall Street this morning as Network Appliance's stock price rose more than 4 percent at one point on rumors that Cisco was going to acquire the systems vendor.

Two Wall Street analysts attributed the rise in NetApp's shares to the rumor, although neither believed the whispers were true. "The whole Street's hearing it," one analyst said. "I'd be surprised if it were true, though."

The analysts agreed the deal would be uncharacteristic for Cisco, which usually buys smaller companies and has denied it wants to sell storage systems.

"It's very unlikely that Cisco will make such a huge acquisition that is divergent into storage and not networking," another analyst says. "Cisco getting into storage would be a significant change in strategy."There are other reasons why the deal wouldn't make sense. It would bring Cisco into direct competition with EMC, Hewlett-Packard, and Hitachi Data Systems -- the systems vendors who sell its Fibre Channel switches -- at a time when it has a chance to gain customers in the wake of Brocade's acquisition of McData. (See Brocade Bags McData For $713M.)

Also, NetApp chairman Don Valentine sold 192,000 shares of NetApp stock last week -- so apparently he didn't hear the rumor.

Still, Cisco did say it was watching the NAS space when it invested in file virtualization startup NeoPath in May. (See Cisco, NeoPath Make It Official.) It also started selling EMC NAS products as part of an OEM deal in 2005, only to abruptly pull the plug on the deal last June. (See Cisco Kills EMC NAS Deal and Cisco & EMC Close NAS Deal.) And as one of the skeptical analysts admitted, "I can't completely rule anything out." Not in these acquisition-happy times.

Even if Cisco isn't after NetApp, it may still be storage shopping. There is also talk of Cisco acquiring data compression vendor Avamar, and analysts say that's a better fit.

"It makes sense for any WAFS (Wide Area File Systems) vendor to buy Avamar," says one analyst. And in case you forgot, Cisco does have a WAFS product. (See Cisco Joins WAN/WAFS in Name Only.)Dave Raffo, News Editor, Byte and Switch