Delaware, May 28, 2022, /IRCOIT research/Broadcom, a semiconductor and infrastructure software company, announced that it is acquiring VMware, the enterprise software firm, in an eye-popping $61 billion cash and stock deal.

VMware ranked first for market share in the global virtualization infrastructure software market in 2021, according to Gartner. Both companies provide cybersecurity services, with Broadcom having purchased Symantec’s enterprise security business (after CA technology) in 2020 for nearly $11 billion. Following the close of the transaction, Broadcom will rebrand and operate as VMware, folding its existing infrastructure and security software into the VMware portfolio. A Broadcom press release heralded the deal, saying the merger of Broadcom software with VMware technology

“will provide enterprise customers an expanded platform of critical infrastructure solutions to accelerate innovation and address the most complex information technology infrastructure needs.”

But the acquisition could face regulatory hurdles. Broadcom sought to buy the semiconductor and software company Qualcomm for $130 billion in 2018 but the Trump administration blocked the deal, citing national security concerns. The unified company will allow customers to “build, run, manage, connect and protect applications at scale across diversified, distributed environments, regardless of where they run: from the data center to any cloud and to edge-computing,” according to the Broadcom press release.

The combined company will be a “remarkable enterprise software player,” VMware CEO Raghu Raghuram said in a statement. While the cost of debt-financed acquisitions continues to jump, cash-flush companies like Amazon, Alphabet, Apple, and Microsoft could use the market downturn to buy smaller players at discount prices. As one equities researcher told the New York Times last week: “Big tech can say, ‘Forget the economy,’” and continue to “invest through the cycle.” In addition, multiple industries are undergoing rapid consolidation, with few signs that the recent market downturn will halt the trend. The VMware deal, for example, marks one of several recent acquisitions in the software sector, which has plenty of room to consolidate. The deal is the second-biggest tech acquisition this year behind Microsoft’s monumental purchase of Activision Blizzard for $70 billion in January. That deal is expected to close by June 2023. A combination of hardware, software, and managed services would allow Broadcom to own the connective tissue of future cloud-based IoT deployments in high-growth sectors. Broadcom is evolving: The chipmaker has been on an acquisition and expansion tear and even tried to buy mobile chipmaker Qualcomm for $103 billion in 2017.

Broadcom CEO Hock E. Tan has focused on strategic acquisitions to build up the company. Recent additions include CA Technologies for $18.9 billion in 2017 and Symantec’s security division for $10.7 billion in 2019, further proof of its focus on enterprise software expansion. VMware—which has more than 500,000 customers, including the Big Three in cloud, Amazon, Microsoft, and Google—unlocks the growing edge and IoT segment for Broadcom. VMware has focused its cloud strategy on hybrid cloud solutions, essentially helping businesses and organizations connect on-premises data centers with managed cloud platforms.

Source: https://www.vmware.com/content/dam/digitalmarketing/vmware/en/pdf/company/vmware-broadcom.pdf

Get insights from IRICOIT Research [email protected]