Down to the Wire: Broadcom-VMware Should Get China’s Approval Any DayDown to the Wire: Broadcom-VMware Should Get China’s Approval Any Day
The $61 billion deal appears near its anticipated Oct. 30 close date.
October 13, 2023
Talk about a nail-biter. As the Broadcom-VMware deal nears its anticipated close, about two weeks from now, it’s still waiting for regulatory approval from China — the last holdout among global antitrust authorities.
That consent could come soon.
Reports from media outlets including Dealreporter indicate that China’s State Administration for Market Regulation stands on the verge of giving its blessing to the Broadcom-VMware combination, without any major concessions.
Once that happens, Broadcom is free to close the $61 billion deal. Regulators in the United States posed no barrier. The deadline to file any opposition passed quietly, paving the way for Broadcom to proceed in its home country. Meantime, officials in the European Union and Great Britain also, after some pushback, recently approved the union as well. Other, smaller countries and regulatory bodies months ago gave the Broadcom-VMware combination their thumbs-up.
Broadcom has contended for months that it will wrap the behemoth purchase of VMware by Oct. 30, within the company’s 2023 fiscal year. With a little more than two weeks left in the month, Broadcom executives likely are working furiously with China’s regulators to secure the necessary approvals.
Broadcom-VMware: Inevitable Rubber Stamp?
Even as the rubber stamp looks inevitable, shares of both Broadcom and VMware were trading down on Friday. That compares to a jump both stocks experienced on Thursday; prices for each rose about 4% on reports of China’s pending approval. CNBC’s Mad Money host, Jim Cramer, is credited with helping boost both corporations’ investor interest. He predicts that once Broadcom completes the VMware purchase, the former’s stock will only rise.
Despite that, Broadcom and VMware share prices had dropped about 1% as of the time of this writing on Oct. 13.
Why Broadcom Wants VMware
Broadcom, a chipmaker, announced in May 2022 that it would buy VMware, a virtualization provider that has been shifting its business model to focus on multicloud environments. Broadcom is known for picking up struggling companies.
The $61 billion transaction represented the second-largest deal announcement of 2022, second only to Microsoft’s purchase of Activision Blizzard. It also spurred some head-scratching, given that Broadcom and VMware operate in wholly different aspects of the technology sector. But, with VMware under its belt, Broadcom expects to expand into cloud computing and capitalize on the booming AI trend.
Broadcom’s Plans for VMware Partners, Employees
For channel partners, the specter of a combined Broadcom-VMware has created both excitement and trepidation. Some partners fear Broadcom will dilute VMware’s capabilities and channel focus. As one partner, Jon Palmer, director of data center engineering at SHI, told Channel Futures at VMware Explore 2023, the situation calls for cautious optimism.
“We’ve seen historically what [Broadcom has] done with other vendors in the past with acquisitions and to the partner community; it always hasn’t been the best,” he said. “They’re saying good things. They’re saying all the right things with what they’re going to do with the business. So we’ll see what happens.”
Palmer was referring to Broadcom’s purchases of CA Technologies and Symantec. To Palmer’s point about “saying all the right things,” though, Broadcom CEO Hock Tan has indeed, in company blogs and during a surprise appearance at VMware Explore in August, repeatedly affirmed support for the indirect channel as he and his team have sought regulators’ blessing. As with any unknown, how Broadcom will expand or contract VMware’s channel strategy remains a wait-and-see situation.
Meanwhile, VMware employees are on tenterhooks, too. Rumors have circulated for some time now that Broadcom will cut many non-engineer roles once it outright owns VMware. (The company in the past has enacted mass layoffs when buying other firms, and the ones it does snap up tend be struggling. VMware, in the eyes of several analysts and per Broadcom’s own contention, ranks as such a candidate as it moves away from its legacy software roots.)
Those rumors appear to have been validated last month in a leaked memo. Some VMware staff will receive full-time employment offers, while other will have the option of taking a “transitional” position. Still others will get the immediate boot. VMware has said it will let its workers know their individual fates by “mid to late October,” per the memo. In other words, any time now, just like the expected approval from China’s State Administration for Market Regulation.
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