US semiconductor giant Broadcom has received EU approval to acquire leading virtualization technology developer VMware for $61 billion. After months of antitrust investigation, the EU regulator has given the green light to the deal, albeit with certain requirements.
Broadcom originally announced it would buy VMware in May 2022, and planned to complete the deal in fiscal 2023. The $61 billion deal will be funded by Broadcom with cash and its own stock in a 50/50 split. The deal puts Broadcom on par with record-breakers such as Dell and EMC ($67 billion) and Microsoft/Activision Blizzard ($68.7 billion, expected to close). Notably, the Microsoft/Activision Blizzard deal is expected to close soon.
Following its investigation, the European Commission concluded that Broadcom’s dominant position in the market does not raise serious concerns. It determined that measures will be taken to ensure healthy competition in the future. The Commission concluded that Broadcom does not have a sufficiently strong position to suppress competition in the market for networking and storage solutions. In addition, the Commission found no evidence that Broadcom was restricting cooperation with AMD and NVIDIA for its own benefit.
As for VMware’s association with Broadcom’s software, this scenario seems unlikely. However, concerns have been raised that Broadcom could limit the compatibility of Fibre Channel adapters with VMware products to gain an advantage over competitor Marvell. To address this concern, the EU regulator has required Broadcom to provide third-party companies with the driver source code and tools needed to create compatible Fibre Channel adapters. This condition assures companies that their equipment will work correctly with VMware’s server virtualization technologies.
Broadcom has already received the necessary approvals to acquire VMware in a number of countries, including Australia, Canada and South Africa. However, the deal is still under review by two stringent regulatory bodies – the US Federal Trade Commission (FTC) and the UK’s Competition and Markets Authority (CMA).
The significance of Broadcom’s acquisition of VMware cannot be overemphasized. It has the potential to significantly strengthen Broadcom’s software business, positioning it as a direct competitor to Qualcomm. VMware, formerly owned by Dell prior to the 2021 demerger, specializes in cloud computing and virtualization technologies and remains a leading provider of virtual machines alongside rival Citrix.
Broadcom, a well-known semiconductor giant, has its chips widely used in Apple and Google smartphones, as well as in a range of Wi-Fi/Bluetooth adapter devices. The magnitude of this deal cannot be overemphasized as it has the potential to cause significant upheaval in the IT sector. After the merger of VMware and Broadcom, the combined teams are expected to focus on the enterprise software organization, particularly in IT infrastructure and cloud computing.
Broadcom has been actively acquiring assets in recent years. In 2018, it acquired security and database software maker CA Technologies for $18.9 billion. In 2019, it acquired Symantec’s enterprise security division for $10.7 billion. Less than a year later, Broadcom sold Symantec’s Symantec division to Accenture, the value of the deal was not disclosed. Broadcom has also repeatedly attempted to acquire its rival Qualcomm, but after former President Donald Trump intervened, the agreement was blocked on national security grounds.