With VMware Earnings on Deck, Leaked Memo Talks ‘Reinforced Deal Review’

An internal note indicates that execs are keen to preserve VMware’s value as the Broadcom deal looms.

Kelly Teal, Contributing Editor

August 24, 2022

3 Min Read
Leaked memo

On the cusp of Thursday’s VMware earnings call comes news that the company is putting the brakes on the amount of time before closing internal sales.

The reason? New policies that seek to “preserve the value of VMware” until the $61 billion Broadcom acquisition closes. That’s according to Business Insider, which cited a leaked VMware memo.

Apparently, some customers want to lock in long-term contracts before Broadcom takes over VMware. That makes sense. There are a lot of unknowns about how the behemoth chipmaker will run the cloud-focused software vendor. Some customers likely worry prices will go up, or that the people who understand their accounts will not be working for the combined company.

Even so, VMware executives now are taking a long time – up to months, per VMware employees who spoke with Business Insider – to approve a number of deals.

“[W]e have reinforced our deal review,” the memo read, according to Business Insider.

A VMware spokesperson did not immediately respond to Channel Futures’ inquiry asking about the accuracy of that report, as well as any impact on partners. Channel Futures welcomes any insight from the managed service providers, resellers and other partners who sell VMware.

A VMware-Broadcom Combo: Questions and Skepticism

With VMware earnings on the verge of indicating how the pending Broadcom purchase might be affecting business, questions (and skepticism) about the deal remain.

Much of the unanswered areas tie to cultural fit, strategy plans and commitment to the channel. To the latter point, despite VMware’s assurances that nothing will be upended, VMware partners including Keystone Solutions appear to be taking a hopeful yet wary stance.

“[A]s with all consolidation, things change,” Richard King, chief strategy officer, told Channel Futures earlier this year.

VMware channel executives, for their part, seem to be trying to alleviate any concerns. As one example, VMware just last week unveiled its overhauled Partner Connect program. The initiative features new ways of participating as a VMware partner, and new ways of getting paid. Will any of the enhancements fall to the wayside once Broadcom owns VMware? That’s another unknown.

But here’s what Tracy-Ann Palmer, vice president of partner experience, programs and investments at VMware, told us: “We are laser-focused on continuing on exactly all the transformation that’s in place . … Right now we are moving forward exactly as projected … and we are actually really excited about it. … When you look at what we’re doing, Broadcom does have a channel, we have a channel. … We’re forging ahead.”

All in all, the pending VMware-Broadcom pairing features many unknowns. Here, however, are some knowns:

  • Broadcom plans to rebrand and operate its software group as VMware.

  • Broadcom is looking to VMware to accelerate its software revenue.

  • VMware shareholders will choose either to receive 142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share.

  • The transaction is expected to close in Broadcom’s fiscal year 2023; that new fiscal year starts in November 2022.

There’s A Lot of Activity Around VMware Right Now

Keep an eye on VMware earnings Thursday, which the company will announce after trading closes on Wall Street. The numbers will give a decent indication of buyers’ responses to the Broadcom takeover. At least one investment firm – Monness, Crespi, Hardt – says investors will be looking for any indications of slowing growth. (Incidentally, at the beginning of August, hedge fund Paulson & Co. said it bought a half-million VMware shares during the second quarter.)

Then, next week, VMware will hold its Explore event in San Francisco. Some observers think the company will provide an update on the status of its business, but anything beyond new product releases seems like a stretch. Companies pending acquisition rarely disclose any information that might jeopardize or otherwise affect the deal.

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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