Semiconductor giant Broadcom Inc. announced that it has reached an agreement to buy virtualization and cloud software maker VMware in a deal worth approximately $61 billion that will be paid partly in cash and partly in shares. Broadcom takes over VMware’s debts, which amount to approximately $8 billion. Broadcom Software Group, the software subsidiary, will be integrated into VMware. With this acquisition, Broadcom can extend its business solutions offering.
Broadcom and VMware are two giants in the world of electronics and information technology. Broadcom was founded in 1961 as a division of Hewlett-Packard and then went through a series of acquisitions and changes that led to it becoming increasingly important in the semiconductor field while also adding enterprise software offerings. VMware was founded in 1998 and has become important over the years mainly due to its growing offer of virtualization software, which has also extended into the cloud field. In 2016 it was bought by Dell and then became an independent company again in 2021.
According to the press release announcing the acquisition, the new VMware, as part of Broadcom, will offer its enterprise customers greater choice and flexibility to address the most complex IT infrastructure challenges. Broadcom intends to maintain the VMware brand by integrating the software offerings of what was until now the Broadcom Software Group subsidiary into VMware. This will allow the company to provide its corporate customers with an even broader offering of virtualization and cloud solutions.
Broadcom President and CEO Hock Tan mentioned the company’s merger and acquisition history stating that the VMware acquisition combines semiconductors and enterprise software into a new offer for their customers. He also stated that there will be a shared culture of innovation. In this regard, VMware CEO Raghu Raghuram also stressed innovation as an important element in the company’s history.
The deal offers VMware the chance to look for other potential buyers but it’s hard to think of a better deal. The problems could come from some antitrust authorities with investigations concerning the influence on the market of the new giant. VMware’s debts accumulated over the years it was owned by Dell between acquisitions and other operations but the predicted revenue and the synergy with Broadcom should make the deal profitable.
