Cisco Takes Tidal Software, Challenges IBM

Updated from 9:42 a.m. EDT

Networking giant Cisco Systems(CSCO Quote) ramped up its data center strategy Thursday, announcing plans to acquire privately held Tidal Software in an attempt to bolster its application management story.

The $105 million deal, which is a combination of cash and retention incentives, is just the latest in Cisco's ongoing metamorphosis.

Tidal Software builds management software for applications such as SAP, Peoplesoft, Java, and Microsoft's(MSFT Quote) .Net. The Palo Alto, Calif.-based firm, which competes with BMC Software(BMC Quote), CA(CA Quote) and IBM's(IBM Quote) Tivoli, also touts its ability to schedule workloads such as databases and customer relationship management.

Cisco is on a data center tear at the moment, recently announcing its entry into the server market.

The San Jose, Calif.-based firm's sales of networking gear have been hammered in the tech spending slowdown, and Cisco is desperate to open up new revenue streams.

Rival networking firm Juniper(MSFT Quote) lowered its first-quarter sales forecast earlier this week, underlining the challenges facing Cisco CEO John Chambers.

Cisco, which is committed to a long-term growth rate between 12% and 17%, dominates the networking market, but is now seeking out new opportunities in corporate data centers and even consumer electronics.

With almost $30 billion in cash and investments at the end of its fiscal second quarter, Cisco can easily afford to buy its way into new markets, as evidenced by the recent $590 million acquisition of camcorder specialist Pure Digital. Snapping up Tidal Software could make Cisco a potential challenger to IBM, and it gives a clear indication of the firm's broader data center ambitions.