In an important development for the technology industry, US semiconductor giant Broadcom has overcome a major obstacle to its acquisition of leading virtualization technology developer VMware. After months of antitrust investigation, the deal was finally approved by the European Union regulator, albeit with some requirements.
Broadcom’s announcement to buy VMware for $61 billion in May 2022 set the stage for a grand bargain. The semiconductor giant plans to finance the deal through a 50/50 split of cash and equity. The Broadcom-VMware acquisition is only slightly behind current record holders Dell and EMC ($67 billion) and Microsoft/Activision Blizzard ($68.7 billion), whose acquisition deal is still in the final stages. Notably, Microsoft’s acquisition of Activision Blizzard could be finalized soon.
Returning to the Broadcom-VMware agreement, the European Commission concluded that Broadcom had little opportunity to abuse its dominant market position. To ensure healthy competition in the future, the Commission imposed certain measures. It concluded that Broadcom does not occupy a “strong position” that could prevent competition in the networking and storage market and does not benefit from restricting cooperation with AMD and NVIDIA.
In addition, VMware’s association with Broadcom software was found to be unrealistic, unlike the motivation to limit the compatibility of Fibre Channel adapters with VMware products in order to suppress longtime competitor Marvell. To address the issue, the EU regulator required Broadcom to provide third-party companies with driver source code and tools to create compatible Fibre Channel adapters. The move is aimed at assuring companies that the hardware works correctly with VMware’s server virtualization technologies.
Broadcom has already received the necessary approvals to acquire VMware in a number of countries, including Australia, Canada and South Africa. However, the deal is still under review by two of the most stringent regulatory bodies: the US Federal Trade Commission (FTC) and the UK’s Competition and Markets Authority (CMA).
The significance of the Broadcom-VMware deal and its potential implications for the industry are enormous. VMware’s integration into Broadcom’s software business could give Broadcom a significant boost, positioning it as a direct competitor to Qualcomm. VMware, formerly owned by Dell prior to the 2021 split, specializes in cloud computing and virtualization technologies and remains a leading provider of virtual machines alongside rival Citrix.
Broadcom, a well-known semiconductor giant, already has a significant presence in the market. Its chips are widely used in Apple and Google smartphones, as well as in various Wi-Fi/Bluetooth adapters. The importance of this agreement cannot be overemphasized and has the potential to have a huge impact on the IT landscape. The combined Broadcom-VMware team is expected to focus on the enterprise software organization, particularly in the areas of IT infrastructure and cloud computing.
Broadcom’s recent series of acquisitions further emphasizes its commitment to expanding its portfolio. In 2018, the company acquired security and database software maker CA Technologies for $18.9 billion, and in 2019, it acquired Symantec’s enterprise security division for $10.7 billion. Broadcom later sold the Symantec business to Accenture, but the terms of the deal were not disclosed. Broadcom also made several attempts to acquire its rival Qualcomm, but the agreement was eventually blocked by former US President Donald Trump on national security grounds.
As Broadcom’s takeover of VMware nears completion, the industry is looking forward to the transformational impact of this merger. The combined strengths and expertise of both companies have the potential to transform the enterprise software organization and revolutionize cloud computing in a big way.