Broadcom may once again take more time to complete its acquisition of VMware. If the $61 billion deal is still not completed by August 26 in the U.S., the date may be pushed to November 26. Can Broadcom get the acquisition across the finish line, despite resistance from competition watchdogs?
The US chip designer has been building out its software portfolio for some time. It acquired CA Technologies and Symantec several years ago. These parties have since been largely absorbed into the Broadcom empire: their own Web sites are out of print, and only Symantec’s name is still prominently displayed on the Broadcom Web site.
VMware as a well-known name is not expected to disappear overnight. As by far the largest hypervisor, it is a global player. It has a huge customer base, something Broadcom is sure to talk about. The intended parent company, according to CEO Tan Hock, promises billions in R&D spending when the acquisition is complete. So big plans, and a significant expansion on the software side of Broadcom’s repertoire. It will also satisfy shareholders when the deal is complete, although the delay won’t help.
Under attack from all sides
Anyone familiar with the developments surrounding Microsoft’s acquisition of Activision Blizzard will be all too familiar with the obstacles such an acquisition presents. The British CMA (Competition & Markets Authority) foresees in that deal a danger of sole domination as far as cloud gaming is concerned. As for Broadcom, the EU watchdog expressed concerns. Privacy regulators are difficult to satisfy around the world, but the EU, the U.S. and the U.K., in particular, are known to stand in the way from the business side. These parties stand up for consumer interests with the threat of monopolization and weakening of existing products.
All of these are dark clouds for acquisitions of this nature, but is this severe weather also defining the climate around these types of acquisitions? Broadcom recently tried to accommodate EU lawmakers by promising interoperability with competitors’ products. Yet the postponement of the decision date in the U.S. proves that it is not one watchdog that is causing problems. In Canada, at least, the deal appears to be going through with reservations, although a 12-month protest can still be filed there. In other words: Broadcom and VMware will have to wait a while longer before uncorking the champagne.
What next?
Broadcom shares are known as a safe “blue chip tech” option, according to The Motley Fool. Yet it is not only political entities that are cause for concern: Apple would eventually like to move away from Broadcom chips that guarantee things like Wi-Fi and Bluetooth connectivity. This is similar to Apple’s decision to design its own chips to avoid dependence on Intel, although Broadcom holds a number of important patents.
As for VMware, the future is uncertain. In a world moving to the cloud and Kubernetes, running VMs (virtual machines) is not as obvious as it once was. Cloud is in demand and ensures VMware will have to keep evolving to stay relevant. With help from Broadcom, it should be able to make strides, something that company is also eagerly awaiting. Indeed, the aforementioned Motley Fool sees the acquisition as a proactive attempt by Broadcom to be much less dependent on its relationship with Apple.
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