More regulators are scrutinizing the $61 billion deal and end users could grow more wary of the combination.

Kelly Teal, Contributing Editor

April 4, 2023

3 Min Read
Merger Rumor Feature Size

As global regulators scrutinize the pending Broadcom-VMware deal, both companies’ customers stand to grow more wary of the combination.

That’s the word from analyst firm GlobalData a week after the UK’s regulatory arm, the Competition and Markets Authority, decided to probe deeper into the $61 billion Broadcom-VMware pairing. The inquiry could push out approval of the acquisition – the second-largest of 2022 – another six months. Last December, the European Union’s competition branch launched its own extensive investigation into the transaction. That move alone was expected to extend any Broadcom-VMware authorizations until least this summer.

Now those delays look to foster long-term doubt among end users. That’s the word from GlobalData’s Rajesh Muru, principal analyst, who gauges the chances of Broadcom-VMware succeeding at 50/50.


GlobalData’s Rajesh Muru

“The CMA move could create a real hurdle for Broadcom,” Muru said on April 4.

More to the point, though, is that the buyers keeping a keen eye on the proceedings are, according to GlobalData research, questioning Broadcom’s acquisition of a well-known and respected vendor that specializes in a wholly different area of technology. Broadcom makes semiconductor chips and some infrastructure software for data centers, networks and the like. VMware, meanwhile, continues to transition into a multicloud services provider for applications.

VMware built much of its foundation on server virtualization, a market GlobalData estimates will be worth more than $15 billion by 2030 due to data center and cloud computing demand. As such, a Broadcom-VMware union could affect other companies including Amazon Web Services, Microsoft Azure, Google Cloud, Oracle Cloud, Huawei, IBM and Citrix, GlobalData said.

What the Market ‘Fails to Acknowledge’

Higher end-user fears over a Broadcom-VMware pairing, then, would stem from a “conglomerate effect” in the server segment, GlobalData found. The firm added that such a reaction likely would hurt VMware more than Broadcom.

“What the market fails to acknowledge is that the effects of the continued uncertainty surrounding the deal could potentially damage … VMware’s brand equity, as there are significant numbers of VMware customers grappling with the situation as they consider their current and future VMware investments,” Muru said.

Overall, concerns about Broadcom-VMware appear on the rise as regulators, including the CMA, assess whether Broadcom will create an unfair competitive playing field in the server market. The European Commission already brought up a similar question last year. Because Broadcom supplies hardware, government watchdogs fear the behemoth company could prevent its rivals from interoperating with VMware’s server virtualization software.

“This would lead to higher prices, lower quality and less innovation for customers and consumers,” Margrethe Vestager, the Commission’s executive vice president in charge of competition policy, said in December.

Along those lines, GlobalData said VMware, because of its cloud and virtualization capabilities, brings more to the table than Broadcom. That could lead to conflicting supplier issues for other players, the firm said.

Broadcom, for its part, has previously asserted that the acquisition of VMware only bodes well for the market.

“The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multicloud era, and we are confident that regulators will see this,” the company maintains.

Broadcom has continued to vouch for the sincerity of its intentions, and cites the approvals it has secured in countries including Brazil and Canada.

What Broadcom Has to Do ‘for this Deal to Work’

Even so, concerns have persisted that Broadcom could, purposely or not, harm VMware’s reputation. Channel partners rank among the observers with misgivings. GlobalData’s Muru said those fears have a possibility of turning into reality.

“For this deal to work, irrespective of the regulatory concerns on fair play, it will be critical that Broadcom maintains VMware’s brand equity and enables the business to operate with a level of autonomy.”

Want to contact the author directly about this story? Have ideas for a follow-up article? Email Kelly Teal or connect with her on LinkedIn.


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About the Author(s)

Kelly Teal

Contributing Editor, Channel Futures

Kelly Teal has more than 20 years’ experience as a journalist, editor and analyst, with longtime expertise in the indirect channel. She worked on the Channel Partners magazine staff for 11 years. Kelly now is principal of Kreativ Energy LLC.

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