As the Federal Trade Commission continues to delay the approval of Broadcom’s acquisition of VMware, the competitive environment within the tech industry hangs in the balance. While the U.S. government claims to protect competition, the growing influence of the Big Three hyperscale cloud vendors threatens to leave legacy incumbents behind. This is where VMware, with its enterprise ecosystem and market forces, can step in to neutralize cross-cloud complexity and provide customers with a viable alternative.
Broadcom, known for its successful track record of mergers and acquisitions, sees the potential in VMware’s sustainable advantage, loyal customer base, and predictable operating history. With a target of $8.5 billion in EBITDA contribution from VMware post-acquisition, Broadcom recognizes the value of this strategic move.
By acquiring VMware, Broadcom gains a foothold in the multicloud space and can offer customers a multicloud approach that addresses their data sovereignty needs. Additionally, Broadcom acknowledges the importance of VMware’s ecosystem in extending its value proposition and providing alternatives to the dominant public cloud players.
While there have been delays in closing the deal, industry analysts believe that the acquisition of VMware stands out for several reasons. Unlike previous Broadcom acquisitions, VMware is not a company past its prime. On the contrary, it is poised for another growth wave, especially with the rise of multicloud adoption.
Post-acquisition, Broadcom plans to integrate its current software business under the VMware umbrella, creating a company that combines chip design entities and a distinct software business. This consolidation of the software stack presents a significant financial opportunity for Broadcom.
Broadcom’s investment strategy involves focusing on companies with a competitive edge and fueling them with targeted research and development resources. The aim is to make staying on Broadcom’s platform more appealing to customers than switching to competitors.
Overall, the acquisition of VMware by Broadcom signifies an extension of Broadcom’s investment approach into software acquisitions. Despite differences in financial performance between the two companies, Broadcom recognizes VMware’s potential for growth and its strategic position in the multicloud market.
1. What is the current status of Broadcom’s acquisition of VMware?
The acquisition is awaiting approval from the Federal Trade Commission, causing delays in the process.
2. How does VMware differ from earlier Broadcom acquisitions?
VMware is not a company past its prime but instead is positioned for growth, particularly in the multicloud space.
3. What is Broadcom’s investment strategy?
Broadcom focuses on companies with a competitive edge and provides targeted research and development resources to make staying on its platform more appealing to customers.