Broadcom CEO Hock Tan has confirmed that, as expected, it will divest VMware End-User Compute and Carbon Black. The company also revealed what strategy it will pursue with the remaining VMware services, likely resulting in higher costs for customers.
During an earnings call on Thursday, Tan said Broadcom will focus on VMware’s “core business.” VMware Cloud Foundation will get the most attention as a separate division within Broadcom, and the only part of VMware’s offerings continuing under that name. In the middle of this year, Tan promised that billions for R&D would be available to VMware after the company was acquired. Now that the acquisition is finally complete, the question remains whether those promises will be fulfilled. After all, Broadcom’s behaviour after acquisitions isn’t one that centres around R&D and further expansion. Instead, it focuses its efforts on profits, minimal expenses and full attention to the biggest spenders among its customer base.
EUC had a positive outlook, Carbon Black was always on the way out
Before the acquisition was complete, persistent rumours were circulating within VMware that EUC would receive a significant boost to its workforce once Broadcom took the reigns. According to reliable sources, around 200 additional employees were expected to build out EUC. This department focuses on device access to VDIs, management of mobile devices and app deployment.
Nothing will come of this assumed expansion of EUC. Tan says many parties are already interested in a possible acquisition. The same goes for Carbon Black (CB), the security company that VMware acquired in 2019. We recently described how that offering was never fully integrated with the rest of VMware; the latter had ambitions to become a security player of note after closing that deal. That didn’t materialize, making it relatively easy for Broadcom to take CB apart and resell it. It has already made CB an independent business unit, an advance on its eventual divestiture.
In addition, VMware has already integrated its offerings with Symantec, which was also acquired from Broadcom and is now a separate division. Carbon Black offers services that largely overlap with it, so an integration between CB and Symantec could already have been a complex affair.
Tip: VMware integrates with Symantec as Broadcom acquisition nears
New plan of action
The earnings call also revealed what Broadcom plans to do with the existing VMware offering. Hock Tan feels that VMware previously sold components on a “very loose” basis. Compute was always offered separately, giving customers the option of only purchasing what they actually wanted from VMware. From now on, he plans to sell only Cloud Foundation as a whole, with the logical conclusion that end consumers will pay higher prices. Through this move, Broadcom hopes to generate an additional 8.5 billion in sales within three years. The Register notes that this figure will have to be partially realised by layoffs. It is also sceptical about the promise that smaller VMware customers will not be driven away.
In addition, CFO Kristen Spears revealed that Broadcom is trying to move customers to a subscription model rather than a license that must be renewed occasionally.
Also read: Broadcom immediately sets up Carbon Black for sale
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