Broadcom May Axe VMware's US Head Count

May 31, 2022

Broadcom 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.”

Rajesh 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.”

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