In a groundbreaking development, semiconductor giant Broadcom has moved one step closer to acquiring leading virtualization technology developer VMware in a deal worth a staggering $61 billion. After months of an intense antitrust investigation, the European Union regulator finally gave its approval for the acquisition, albeit with certain requirements to ensure fair competition.
Broadcom first announced its purchase of VMware in May 2022 and initially planned to close the deal in fiscal 2023. The semiconductor giant intends to finance the $61 billion deal through a combination of cash and its own stock, split evenly. This acquisition places Broadcom’s deal in the same league as record holders Dell and EMC ($67 billion) and the pending Microsoft/Activision Blizzard deal ($68.7 billion). In fact, the Microsoft/Activision Blizzard deal is expected to close imminently, possibly within the next couple of days.
Returning to the Broadcom and VMware agreement, the European Commission determined that Broadcom had limited opportunities to abuse its dominant market position. The Commission identified measures that would ensure healthy competition in the future. Broadcom was found to lack a “strong position” that could hinder competition in the networking and storage market. Furthermore, the investigation concluded that Broadcom had no incentive to restrict cooperation with AMD and NVIDIA.
The association of VMware with Broadcom software was deemed unrealistic, debunking concerns that Broadcom would limit the compatibility of Fibre Channel adapters with VMware products to undermine rival Marvell. To prevent this potential issue, the EU regulator has imposed a requirement on Broadcom to provide third-party companies with driver source code and tools to develop compatible Fibre Channel adapters. This move aims to guarantee that companies can confidently ensure the proper functioning of their hardware with VMware’s server virtualization technologies.
Broadcom had already received necessary approvals for the VMware acquisition in several countries, including Australia, Canada, and South Africa. The agreement is still under 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 and its potential implications for the industry cannot be overstated. VMware’s integration into Broadcom could provide a significant boost to the latter’s software business, putting it in direct competition with Qualcomm. VMware, previously owned by Dell until the separation in 2021, specializes in cloud computing and virtualization technology, maintaining its position as a leading provider of virtual machines alongside rival Citrix.
Broadcom is a renowned semiconductor giant, with its chips widely used in smartphones from Apple and Google, as well as Wi-Fi/Bluetooth adapters in a wide range of devices. The impact of this acquisition on the IT landscape cannot be underestimated. Once Broadcom and VMware merge, the combined teams are expected to focus on enterprise software organization (IT infrastructure) and cloud computing.
Broadcom has actively pursued acquisitions in recent years. In 2018, the company acquired security and database software maker CA Technologies for $18.9 billion. In 2019, it further expanded its portfolio by acquiring Symantec’s enterprise security division for $10.7 billion. Less than a year later, Broadcom sold Symantec’s business to Accenture, though the financial details of the transaction were undisclosed. Additionally, Broadcom made several attempts to acquire its competitor Qualcomm, but the agreement was ultimately blocked by Donald Trump due to concerns about national security risks.