US semiconductor giant Broadcom has received the green light from the European Union regulator to acquire virtualization technology developer VMware, marking a landmark event for the technology industry. The $61 billion deal, announced in May 2022, had been under scrutiny and antitrust investigation for months. With the EU approval, Broadcom is one step closer to solidifying its position as a major player in the software industry.
Broadcom’s purchase of VMware, funded by a 50/50 split of cash and equity, has the potential to create a sensation in the industry. Although the deal is only slightly behind such record-breaking deals as Dell’s acquisition of EMC ($67 billion) and the Microsoft/Activision Blizzard deal ($68.7 billion), Broadcom’s investment in VMware is still a monumental event. Notably, the Microsoft/Activision Blizzard deal is expected to close soon.
The European Commission, after a comprehensive assessment, concluded that Broadcom’s ability to abuse its dominant market position was limited. It concluded that special measures would ensure healthy competition in the future. The Commission found no evidence that Broadcom had a “strong position” capable of stifling competition in the networking and storage market. In addition, the Commission found no reason to believe that Broadcom’s collaboration with AMD and NVIDIA was unreasonably restricted.
Concerns about VMware’s interoperability with Broadcom’s software were found to be unrealistic. However, to address possible limitations on the compatibility of Fibre Channel adapters with VMware products, the EU regulator has required Broadcom to provide third-party companies with driver source code and tools to create compatible adapters. This requirement ensures that companies can ensure that their hardware works properly with VMware’s server virtualization technologies.
Broadcom had previously received approval 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 carries huge potential for Broadcom’s software business, positioning the company as a direct competitor to Qualcomm. VMware, formerly owned by Dell until its demerger in 2021, specializes in cloud computing and virtualization technologies, cementing its status as a leading virtual machine vendor alongside rival Citrix.
Broadcom, a well-established semiconductor giant, supplies chips widely used in Apple and Google smartphones, as well as in Wi-Fi/Bluetooth adapters installed in a variety of devices. The implications of this acquisition go far beyond the immediate transaction, potentially changing the entire IT landscape. After the merger, the combined VMware and Broadcom teams are expected to focus on the enterprise software organization, particularly in IT infrastructure and cloud computing.
Broadcom’s string of acquisitions has become a feature of recent years. In 2018, the company acquired security and database software maker CA Technologies for $18.9 billion and enterprise security unit Symantec for $10.7 billion in 2019. Less than a year later, Broadcom sold Symantec’s business to Accenture. Broadcom also made repeated attempts to acquire rival Qualcomm, but the deal was eventually blocked by former US President Donald Trump on national security grounds.
As Broadcom’s acquisition of VMware nears completion, the technology industry is eagerly anticipating the transformative impact this powerful partnership will have on the software and cloud computing sector. The deal marks a watershed moment for Broadcom, cementing its position as a key player and setting the stage for future innovation and growth.