Broadcom to Acquire VMware in Massive $61 Billion Deal – TechCrunch
Sometimes when there is smoke, there is actually fire. Such was the case with Broadcom’s rumored interest in VMware last weekend. Turns out the fire was hot and today Broadcom announced the acquisition of VMware in a massive $61 billion deal.
The deal is a combination of cash and stock, with Broadcom assuming $8 billion in VMware debt.
With VMware, Broadcom gets more than the basic virtualization the company was built on. It also gets other things acquired along the way to diversify, like Heptio for containerization, Pivotal, which helps provide support services to businesses transitioning to modern technology. At the same time he bought Pivotal, he also acquired the security company Carbon Black.
It touches on a lot of technology, but it begs the question of where it all fits with Broadcom, which has spent a considerable amount of money in recent years to buy some key software ahead of today’s announcement.
As we wrote earlier this week, it’s not obvious with other software in the wallet:
He spent more than $18 billion in 2018 to buy legacy enterprise software company CA Technologies and another $11 billion a year later for Symantec’s legacy security business. They are very different animals from VMware, which is still a viable company and not a dinosaur with a portfolio of book licensing deals that a company like Broadcom can take advantage of.
Yet when we speculated about who might buy VMware after it was announced that Dell was running it last year, one of our suspects was Intel, whose CEO ran VMware. So the idea that a chipmaker would be interested in VMware was there, but not this particular one.
VMware CEO Raghu Raghuram put a typical positive spin on the agreement that the two companies are better together. “Combining our assets and talented team with Broadcom’s existing enterprise software portfolio, all hosted under the VMware brand, creates a remarkable enterprise software player,” he said in a statement. referring to those two other things that Broadcom already has.
Holger Mueller, an analyst at Constellation Research, sees some synergy between the three pieces of software, even though Symantec and CA are more legacy games. At least VMware has the potential to give Broadcom some financial stability, as long as it has the good sense to leave it alone.
“VMware doesn’t have the roller coaster of chip market ups and downs and puts Broadcom on a more stable trajectory. It’s also more profitable. I expect Broadcom to leave VMware alone like Dell did. has done as long as the company keeps its promises,” he said.
EMC bought VMware in 2003 and it became part of the business federation under the EMC umbrella, which allowed it to operate independently with its own board and stock. That continued when Dell bought EMC in 2015 in a deal originally valued at $67 billion, not that far off VMware’s price alone today.
Michael Dell will end up doing pretty well here, given that he personally owns over 40% of the outstanding Dell stock. He and his longtime investment partner Silver Lake, which still owns 10% of the shares, both unsurprisingly gave their approval to the deal.
According to data from Gartner, VMware ranked first by market share in the global virtualization infrastructure software market in 2021, with 72% market share and $5.9 billion in revenue. dollars.
The company has a shop around provision in the deal, in which it has 45 days to find a better deal, although that seems unlikely at this price. If that passes without any changes, the deal will still be subject to regulatory scrutiny, which hasn’t been a rubber stamp of late, especially with large numbers like this.
Broadcom has faced regulatory hurdles in the past when it tried to buy Qualcomm in a massive $130 billion deal that was ultimately thwarted by US regulators in 2018. Maybe regulators will be more supportive of a software deal.