UPDATE 2-DEALTALK-VMware a compelling pursuit for Cisco

(Adds analyst comments, updates share moves)

By Anupreeta Das

NEW YORK, Feb 11 (Reuters) - Cisco System Inc's (CSCO.O) pursuit of virtualization software maker VMware Inc (VMW.N) could be more serious than many on Wall Street believed, as the network equipment maker searches for new sources of growth.

Cisco has long coveted VMware, whose software helps computer servers run more efficiently and frees companies from having to maintain huge data centers. It went so far as to hold informal talks last summer to buy VMware's parent EMC Corp (EMC.N) according to a person familiar with the matter.

The companies did not move into formal negotiations, and tight credit markets make financing the purchase of a $25 billion company difficult these days. But things could change quickly if EMC decides to put VMware on the market.

"This is a logical deal to do," said a West Coast technology banker. "The question is, is it strategically compelling enough in this environment?"

Spokesmen for Cisco and EMC declined to comment.

Shares of VMware gained as much as 6.4 percent on Wednesday afternoon, while EMC shares rose as much as 3.3 percent, both on the New York Stock Exchange. Cisco edged lower on Nasdaq.

Jefferies & Co analyst Katherine Egbert said VMware shares rose on expectations that Cisco might buy EMC.