Broadcom May Axe VMware's US Head
May 31, 2022
and VMware inked an agreement under which Broadcom will acquire all of
the outstanding shares of VMware in a cash-and-stock transaction that
values VMware at approximately $61 billion, based on the closing price
of Broadcom common stock on May 25, 2022. In addition, Broadcom will
assume $8 billion of VMware net debt.
David Bicknell, Principal Analyst at GlobalData, a leading data and
analytics company, said “VMware should take heed of Symantec and CA
Technologies’ experiences following their acquisition by Broadcom. CA
Technologies reportedly saw a 40% reduction in US headcount and employee
termination costs were also high at Symantec.
“VMware currently has a strong reputation for its cybersecurity
capability in safeguarding endpoints, workloads, and containers.
Broadcom’s best shot at making this deal work is to let profitable
VMware be VMware.
“Although a chip company buying a cloud software company wouldn’t
ordinarily raise US regulatory concerns, the takeover of a leading-edge
US cloud software vendor by a Singapore-based company with very strong
links to China might prompt regulatory interest given today’s
geopolitical backdrop. Still, it’s unlikely to scupper the deal.
“After having its fingers burnt by regulators in its failed bid to buy
Qualcomm, Broadcom will expect this deal to go through. But it shouldn’t
be surprised if regulators take a close interest.”
Muru, Principal Technology Analyst at GlobalData, added “VMware has
really promoted in the last two years their strong network, cloud, and
analytics capabilities, all complemented with its security capabilities
through the Carbon Black acquisition. Broadcom will have to maintain
VMware’s brand and market positioning without diverting from VMware’s
previous aspirations and vision.
“Broadcom still possesses, for example, Symantec’s security portfolio
under its belt. Therefore, the rebranding of Broadcom’s Software Group
as VMware will create software portfolio overlap and potentially create
market confusion. Portfolio rationalization will no doubt be on the
agenda under the new branding.
“VMware, part of Broadcom can thrive, particularly if they can leverage
Broadcom’s infrastructure capabilities and customer base in networks and
storage. However, success will depend on how well the businesses
integrate across the different business units to make this happen.”