Arista beats out Dell, Cisco, Gigamon and Juniper to buy Big Switch Networks

networking
Arista Networks is buying early SDN pioneer Big Switch Networks, according to a source. (Pixabay)

Arista Networks beat out some big names in its deal to buy Big Switch Networks, which came to light last week.

SDxCentral was the first to report that Arista was buying Big Switch Networks, and FierceTelecom has confirmed the deal with its own source, who said that Cisco met with Big Switch "numerous times" while a possible deal with Dell reached the level of having CEO and founder Michael Dell involved in talks at one point. Additional companies that kicked the tires on Big Switch Networks include Juniper Networks and Gigamon, according to the source. 

Arista Networks declined to comment on the deal to buy Big Switch Networks. Arista reports its next earnings on Feb. 13, at which time it may mention Big Switch if the company’s lawyers deem the deal “material” to its finances. Big Switch Networks' media contact didn't reply to an email inquiry about the sale. A Cisco spokesperson said the company does not respond to rumors. Dell, Juniper and Gigamon didn't respond to email requests for comments by Monday afternoon. 

Blitz Week

Register for FierceTelecom Blitz Week - June 15-18

As the telecom industry moves forward in the age of new technology, FierceTelecom Blitz week addresses the questions of how platforms, providers, and more will modernize to keep up with these fast-paced changes and their current status of implementing these changes. Join us June 15-18 to dive deep into the world of telecom transformation.

Dell seemed like a likely candidate to buy Big Switch, given that the two companies' relationship dates back at least six years. And then there was last year's original equipment manufacturing (OEM) agreement that they signed in April.

RELATED: Big Switch stands tall with Dell EMC OEM partnership

"Given their partnership with Dell, it's almost certain that conversations around an acquisition happened along the way," said Roy Chua, the founder and principal at AvidThink. "Nevertheless, Arista Networks should be a good home for the talent and technology: disaggregated architecture, a unified networking fabric and a strong monitoring solution. My early view is that this was more of a talent and technology acquisition, and the product lines will be folded in under Arista's existing products."

Big Switch employees started getting wind of the deal two weeks ago. According to the source, a large number of Big Switch employees outside of the engineering department will be losing their jobs when the deal is completed.  "A lot of this stuff isn't looking good for them," the source said. 

In regard to the amount that Arista is paying for Big Switch Networks, $70 million has been making the rounds, which seems low for a company that has raised a total of $119.5 million in investments, according to Crunchbase.

"Seventy million is one bucket and not the full picture of the deal," the source said. "Only a handful of people know the full picture. Last year Big Switch Networks did around $60 million in sales; 14 months ago the company was valued at $350 million, so the $70 million doesn't add up."

Rumors swirled that original stockholders and employee stocks were "underwater" with the Arista deal, but also that Arista put together compelling packages to retain key engineering staff. These rumors said things were very contentious between the investors because only the last ones in got something back out and earlier investors didn't want to sign off on the deal. The rumors have also said that Big Switch founder Kyle Forster did not make money on the deal and lost his own investment.

The source said it didn't seem possible that Forster lost out on his investment in Big Switch Networks given that he owns a lot of stock and is on the company's board. 

"It's weird saying Kyle lost his investment," the source said to FierceTelecom. "It doesn't seem as though it would end up that way." 

After being founded 10 years ago by Forster and members of a Stanford research team, Big Switch Networks was among the leaders in the halcyon days of software-defined networking (SDN). The Santa Clara, Calif.-based company's software-defined networking solutions grew at a compound annual growth rate (CAGR) of nearly 80% from 2015 to 2018.

RELATED: Big Switch Networks beefs up hybrid cloud portfolio with four new offerings

“Big Switch was able to grow revenue to a substantial size, but recently there has been talk that they needed to raise more money, and selling when you are under financial pressure never gets the highest price," said Scott Raynovich, the founder and chief analyst of Futuriom. "Big Switch was an early leader in the SDN market, but timing is everything. They may have missed an opportunity to sell at a higher price at an earlier stage.

"Their controller-based architecture started to fall out of favor to a certain extent, so they had to pivot the product. Their recent pivot to a multi-cloud focus shows promise and is much more compelling with a deep-pocketed partner such as Arista.”

Big Switch’s Cloud-First Networking portfolio has three solutions that are part of the Dell EMC open networking portfolio. Big Cloud Fabric is a VPC-based logical networking fabric while Big Monitoring Fabric is a network visibility fabric. Big Switch’s newest product, Multi-Cloud Director, provides federated management of multi-site BCF and BMF deployments, across public, private or multi-cloud environments.

Chua said there are still a few players in Big Switch Networks' space, including Pica 8 and Cumulus Networks, both of which have extended into campus networking in hopes of finding new growth opportunities.

"It's not clear what outcomes they will see," he said of Pica 8 and Cumulus. "And of course, there's a raft of new players in this space pushing new software stacks and approaches, including Arrcus, Volta, and DriveNets, but with a strong routing focus than a pure switching play and in many cases, targeting carriers and cloud more than enterprises."

Suggested Articles

VMware announced on Thursday that it has struck a deal to buy network security vendor Lastline for an undisclosed sum.

For the first time in nine years, the data center switch market recorded a decline due in part to COVID-19, according to research.

While many vendors have bemoaned the impact of the COVID-19 pandemic in their earnings reports, Ciena rose above the storm in its fiscal Q2 earnings.