VMware, the market leader in software that allows users to virtually access computers, is hoping that its acquisition of Nicira for a comparatively huge $1.26bn will help it dominate the virtual networking space.

Virtual computing, which allows a single computer to act as though it is many computers, allows for far greater portability and cost effectiveness for users. Through the use of cloud computing, VMware has dominated this market, launching in 1998 and going on to work on all major computer operating systems. Last year, their total revenues were reported to be nearly $3.77bn.

Nicira was launched in 2007 with a $50m start-up fund, with one of VMware’s original founders, Diane Greene, one of the early investors. Their niche is in virtual networking, which looks to transport large files and systems over a virtual infrastructure.

Marc Andreessen, an investor in Nicera, told Forbes: “Nicira validates the idea of software-defined networking,” Andreessen says. “It creates a new industry for networking software. There’s all kinds of benefits for customers. It’s much easier to deploy a network. It pulls a lot of the logic from the routers and switches to the software.”

Announcing the deal yesterday, VMware’s CEO Paull Maritz said: “VMware has led the server virtualisation revolution, and we have the opportunity to do the same in data-center and cloud networking. The acquisition of Nicira adds to our portfolio of networking assets and positions VMware to be the industry leader in software-defined networking.”