‘Start of a New Era’: $61 Billion Broadcom-VMware Deal Closes

The $61 billion Broadcom-VMware deal is complete.

Early Wednesday, chipmaker Broadcom issued a press release stating it has closed its long-awaited purchase of the cloud computing company. 

The news came a day after Broadcom announced it had secured the last regulatory approval needed for the acquisition. That blessing came from China more than three weeks after Broadcom’s original target date for closing, Oct. 30. The delay related to new U.S. controls on exports of advanced chips.

But, after consenting to some “restrictive conditions,” Broadcom has everything it needs to add VMware to its portfolio.

Broadcom's Hock Tan

“We are excited to welcome VMware to Broadcom and bring together our engineering-first, innovation-centric teams as we take another important step forward in building the world's leading infrastructure technology company,” Hock Tan, president and CEO of Broadcom, said. “With a shared focus on customer success, together we are well positioned to enable global enterprises to embrace private and hybrid cloud environments, making them more secure and resilient. Broadcom has a long track record of investing in the businesses we acquire to drive sustainable growth, and that will continue with VMware for the benefit of the stakeholders we serve.”

Related:Broadcom-VMware: Partners Face ‘Too Many Unknowns’

'Pleased to See This Period of Uncertainty Come to an End’

Broadcom is known for taking the companies it buys and stripping operations to the bone to increase margins and investor returns. As a result, VMware employees have been expressing concern over at TheLayoff.com for months now — and Broadcom staff have chimed in with advice and insight.

Meanwhile, channel partners and other industry observers have remained both wary and watchful as acquisition proceedings dragged on throughout the year. Now, at least one cloud managed service provider is expressing relief that the Broadcom-VMware saga has reached a new milestone.

Xtravirt's Gavin Jolliffe

“We are pleased to see this period of uncertainty come to an end,” Gavin Jolliffe, CEO of Xtravirt, told Channel Futures on Nov. 22.

Jolliffe said his company is looking ahead to what comes next with Broadcom-VMware wrapped up.

“Today marks the start of a new era which we believe will bring new opportunities and relevance to VMware customers across their data center and multicloud strategies,” he said.

Addressing that very point, Broadcom noted that it plans to “enable enterprise customers to create and modernize their private and hybrid cloud environments.”

To do so, the chipmaker said it will invest in VMware Cloud Foundation, including Tanzu. There has been some question around whether Broadcom would keep the Tanzu portfolio. Broadcom says there’s no doubt about the matter.

Related:What’s Next for Broadcom-VMware as China Holds Up Clearance?

“VMware will offer a rich catalog of services to modernize and optimize cloud and edge environments, including VMware Tanzu to help accelerate deployment of applications, as well as Application Networking (Load Balancing) and Advanced Security services, and VMware Software-Defined Edge for Telco and enterprise edges,” the company explained in its press release.

Xtravirt folks (and their peers, naturally) will be keeping an eye on such progress as the next stage of the Broadcom-VMware combination unfolds.

“We look forward to seeing Broadcom’s statements of intent coming to fruition with increasing clarity about how these objectives will be achieved,” Jolliffe said.

What Comes Next for Broadcom-VMware? ’Outright Terrifying’

Xtravirt is not alone. Analysts and vendors alike also are keeping tabs on how Broadcom-VMware moves along.

“It must be a relief for both companies that this deal has gone through,” said Rajesh Muru, principal technology Analyst at GlobalData. “But the byproduct of this standoff has been the possible decremental impact on VMware’s overall business and share value … as customers are swayed towards competitors.”

Bryan Cantrill, co-founder and chief technology officer of startup hyperscaler rival Oxide Computer, agreed. The problem, he noted, is that VMware alternatives are hard to come by. And, he said, “Broadcom knows this. The lack of alternatives is exactly why VMware is attractive to them. It’s also why the deal has been cause for concern for regulators, and outright terrifying for customers and partners.”

There’s more to the fear, Cantrill added.

“In the conversations that we have had with our early customers and partners, anxiety about the deal is correlated to their familiarity with Broadcom: Those who are unfamiliar with the company hold out naive hopes — while those who know Broadcom (either directly through its traditional semiconductor product portfolio or from living through the Computer Associates acquisition) know better,” he said. “These customers know what's coming: Broadcom's projected growth in EBITDA from VMware will come out of the hide of their strained IT budgets — and they are actively looking for alternatives.”

Xtravirt’s Jolliffe, on the other hand, is maintaining a more optimistic outlook about VMware’s fate.

“Broadcom’s promise to invest in the partner ecosystem and simplify offerings aims to make it easier for customers to engage with, procure, and operate VMware solutions,” he said. “We are pleased to see the acquisition close and remain committed to providing insights and feedback that will shape the new partnership model and drive customer success across the whole VMware portfolio.”

The Business End of Broadcom-VMware

Now that Broadcom owns it, VMware no longer trades on the New York Stock Exchange. Shares of Broadcom had soared nearly 80% in pre-market trading on Nov. 22, up $7.80, to $981.20, as of 10 a.m. ET.

Most VMware shareholders chose to receive stock from the Broadcom-VMware deal. Those investors will get a package worth about $197 per share, according to various estimates.