Broadcom's Proposed $61 Billion VMware Acquisition Scrutinized by UK Regulators

The U.K.'s Competition and Markets Authority (CMA) is initiating an investigation into Broadcom's proposed $61 billion deal to buy virtualization software giant VMware. From a report: The news comes shortly after news emerged that the European Commission (EC) was also proceeding with an investigation into what would be one of the biggest tech acquisitions of all time. In the companies' domestic U.S. market, meanwhile, the Federal Trade Commission (FTC) last month progressed its investigation into a deeper second review phase, which means that the FTC saw enough during its initial analysis to warrant a more extensive look. The crux of the deal is chip giant Broadcom seeking to diversify by expanding deeper into the enterprise infrastructure software fray. While VMware's shareholders greenlighted the proposal a couple of weeks back, a deal of this size was always going to garner regulatory scrutiny, so there is little surprise that we're seeing multiple authorities look into the deal. Broadcom had previously stated that it hoped to close the deal by October, 2023, so it was aware that this was going to be a long journey.

they will remove drivers for older hardware so rev

[Joe_Dragon]

they will remove drivers for older hardware so you need rebuy $200-$300 high end nics so you can update esxi.

Re:

[geekmux]

they will remove drivers for older hardware so you need rebuy $200-$300 high end nics so you can update esxi.

As if those investing in $5000 worth of server hardware and spending thousands in software licenses in order to actually take advantage of virtualization, are really concerned about that NIC "tax".

You might as well be arguing against Capitalism, with property taxes.

Re:

[deKernel]

I wish I could disagree with you, but I sure can see Broadcom doing something like that. I can also envision them making such draconian requirements even with Workstation to the point that unless you are using their hardware on this OS, you can't even install their product. If the deal does go through, I have a feeling my days on Workstation will be limited.

VMWare is overvalued in this purchase

[Martin Blank]

I don't see what Broadcom thinks they can get from a $61 billion purchase of a company that already has a P/E ratio of 31 and a market cap of almost $50 billion as of this post. VMWare's business is already impacted by cloud computing and competition, and while there are situations were having local virtualization makes sense, the price increases and cost cutting (at least some of which is going to have to come from development that has already slowed in recent years) that will have to follow will just drive more customers away. I think Broadcom is far too excited about expanding their domain while having too little a focus on the bottom line.

Although I am wondering about history: We have seen these massive growth-by-acquisition companies come up before, and they frequently are covering up something else happening behind the scenes. WorldCom, Tyco, Adelphia... All considered titans of their industries, but when the books were opened, a lot of shady and downright illegal stuff was happening.

Re:VMWare is overvalued in this purchase

[EvilSS]

Well if they stick to the playbook they will discontinue perpetual licenses, instead moving to all subscription based licenses. Then they will lay off their SMB and Commercial sales orgs, pushing those segments to partners to deal with, while VMWare focuses on milking their large enterprise accounts for as long as they can.

Re:

[Martin Blank]

It still doesn't make financial sense. At best, they're looking at a 20-year payoff for the investment. That's a huge gamble considering how much has moved to cloud services, and how much continues to move. Maybe they're planning to set up their own cloud service based on VMWare technology, but I don't think that can make up the gap, either, and will just be more money spent chasing after profits they're not going to get. I'm sure there's a cheaper virtualization platform out there they could have bought, t

Re:

[EvilSS]

I doubt they will do their own cloud. That's a massive capital expenditure to spin up. I think they think they are going to do it by moving to a recurring revenue model and focusing on their top customers. It's been their model with other acquisitions. Personally I agree, VMWare is not a "growth" company, and not only are they getting nibbled at by cloud but also on-prem, and that's only going to get worse as Microsoft pushes Hyper-V out of the way for Azure Stack HCI, a "free*" hypervisor that's also a gat

License Price times 10X

[DigitalCH]

They are going to follow the private equity playbook. By a company that clients can't exit without 2-3 years notice, hack the price of a license by 10-20X, run the business into the ground while you make great profit. This is the reason it's not safe to buy commercial enterprise software any more unless it is fully open source.

Re:

[EvilSS]

hack the price of a license by 10-20X

Yep, they already said they are going to move almost immediately to a subscription model, which is funny considering how much marketing collateral VMware devoted to their commitment to perpetual licensing when Citrix went subscription only.