Broadcom could prevent its hardware rivals from interoperating with VMware’s server virtualization software.

Edward Gately, Senior News Editor

December 21, 2022

2 Min Read
Government Regulation
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The European Commission has begun its in-depth investigation into Broadcom’s proposed $61 billion acquisition of VMware, addressing a number of competition concerns.

The Commission is particularly concerned that the transaction would allow Broadcom to restrict competition in the market for certain hardware components which interoperate with VMware’s software.

The Commission is the competition branch of the European Union.

Initial Acquisition Investigation Raises Concerns

Margrethe Vestager is the Commission’s executive vice president in charge of competition policy.

Vestager-Margrethe_Broadcom.jpg

European Commission’s Margrethe Vestager

“Broadcom, a major supplier of hardware components, is acquiring VMware, a key server virtualization software provider,” she said. “Our initial investigation has shown that it is essential for hardware components in servers to interoperate with VMware’s software. We are concerned that after the merger, Broadcom could prevent its hardware rivals to interoperate with VMware’s server virtualization software. This would lead to higher prices, lower quality and less innovation for customers and consumers.”

Keep up with the latest channel-impacting mergers and acquisitions in our M&A roundup.

In addition, the commission will examine whether Broadcom may hinder the development of SmartNICs by other providers. In 2020, VMware launched Project Monterey with three SmartNICs sellers, Nvidia, Intel and AMD Pensando. Broadcom may decrease VMware’s involvement in Project Monterey to protect its own NICs revenues. This could hamper innovation to the detriment of customers, the commission said.

Furthermore, the commission said Broadcom may start bundling VMware’s virtualization software with its own software, namely mainframe and security software, and no longer offer VMware’s virtualization software as a stand-alone product, reducing choice and potentially foreclosing rival software providers.

Broadcom Responds

Broadcom tells us it looks forward to “continuing our constructive work with the European Commission as part of their thorough review process.”

“We are making progress with our various regulatory filings around the world, having received legal merger clearance in Brazil, South Africa and Canada, and foreign investment control clearance in Germany, France, Austria and Italy,” it said.

Broadcom expects the deal to close during its fiscal year 2023, which began last month.

“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 when they conclude their review.”

The commission has until May 11 to make its decision. The opening of an in-depth inquiry does not prejudge the final result of the investigation.

The vast majority of notified mergers don’t pose competition problems and are cleared after a routine review, the commission said.

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About the Author(s)

Edward Gately

Senior News Editor, Channel Futures

As news editor, Edward Gately covers cybersecurity, new channel programs and program changes, M&A and other IT channel trends. Prior to Informa, he spent 26 years as a newspaper journalist in Texas, Louisiana and Arizona.

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