In a monumental move that could reshape the IT landscape, semiconductor giant Broadcom has cleared a major hurdle in its acquisition of virtualization technology developer VMware. After months of intense antitrust investigation, the EU regulator has finally given the green light to the staggering $61 billion deal, albeit with certain requirements.
Broadcom initially announced its purchase of VMware in May 2022, with the original plan to close the deal in fiscal 2023. The $61 billion acquisition will be financed by Broadcom through a 50/50 split of cash and its own stock. This puts Broadcom’s deal with VMware in the league of record-breaking acquisitions, trailing just behind Dell and EMC’s $67 billion deal and the ongoing Microsoft/Activision Blizzard acquisition worth $68.7 billion, which is nearing completion.
Turning to the Broadcom and VMware agreement, the European Commission concluded that Broadcom had limited opportunities to abuse its dominant market position. The Commission determined that separate measures were necessary to ensure healthy competition in the future. It found that Broadcom did not possess a strong enough position to stifle competition in the networking and storage market. Additionally, the investigation revealed that Broadcom did not benefit from restricting cooperation with AMD and NVIDIA in any significant manner.
Concerns regarding VMware’s association with Broadcom software were deemed unrealistic, unlike the potential motivation to impede longtime rival Marvell by limiting compatibility of Fibre Channel adapters with VMware products. To address this, the EU regulator has mandated that Broadcom provide third-party companies with driver source code and tools to develop compatible Fibre Channel adapters. This requirement ensures that companies will have confidence in the proper functioning of their hardware with VMware’s server virtualization technologies.
Broadcom had already obtained necessary approvals for the acquisition in several countries, including Australia, Canada, and South Africa. However, the deal still awaits review by two stringent regulators—the US Federal Trade Commission (FTC) and the UK’s Competition and Markets Authority (CMA).
The significance of the Broadcom and VMware deal cannot be overstated, with potential implications for the industry. VMware’s integration into Broadcom’s portfolio presents a tremendous opportunity for Broadcom’s software business, positioning it as a direct competitor to Qualcomm. VMware, formerly owned by Dell until its separation in 2021, specializes in cloud computing and virtualization technology. It remains a leading provider of virtual machines, alongside rival Citrix.
Broadcom, a renowned semiconductor giant, is widely recognized for its chips used in Apple and Google smartphones, as well as in Wi-Fi/Bluetooth adapters across various devices. This agreement holds immense importance and has the potential to greatly impact the IT landscape. Once the merger between VMware and Broadcom is complete, the combined teams are expected to focus on enterprise software organization, particularly in IT infrastructure and cloud computing.
Broadcom’s aggressive acquisition strategy has been evident in recent years, with notable purchases including security and database software maker CA Technologies for $18.9 billion in 2018, and Symantec’s enterprise security division for $10.7 billion in 2019. Notably, Broadcom subsequently sold Symantec’s business to Accenture within a year. Additionally, Broadcom had made attempts to acquire its competitor Qualcomm, but the deal was ultimately blocked by then-President Donald Trump due to concerns over national security risks.
As the Broadcom-VMware merger moves forward, the industry awaits the outcome of regulatory reviews by the FTC and the CMA. If successful, this transformative deal could have far-reaching implications, setting the stage for a new era in enterprise software and cloud computing.
