Broadcom buys VMware in one of the Largest Tech Acquisitions Ever. What's the Big Deal?
Broadcom is known for brutally gutting the companies it acquires. Will VMware share the same fate? What should we do to prepare?
The Acquisition So Far
A key provider of virtualization software, VMware, will be finally bought by Broadcom.
The world of IT reveled in the predictability of their costs for virtualizing servers, using VMware's vSphere to optimize hardware usage in data centers. Every day, the IT landscape thrived as VMware virtualized servers, charged consistent prices, and innovated on their container solutions.
But one day, a seismic announcement disrupted this tranquil routine.
Broadcom, a semiconductor giant known for its brutal acquisitions, declared its intent to acquire VMware—one of the largest acquisition in the tech industry, totaling a staggering $69 billion. Unfortunately, international politics were not in Broadcom's favor. China blocked the acquisition likely as a geopolitical ploy against the US's chip sanctions.
A year later China gives Broadcom the go ahead to buy VMware.
Broadcom? More like Broadcon.
Due to the approval delay, the IT community prepared for the impending acquisition.
Broadcom's acquisition track record raises concerns. After acquiring companies like CA Technologies and Symantec, Broadcom hiked prices, slashed operating budgets, and stopped internal innovation. They dropped almost all support for smaller accounts, leaving customers in a tizzy.
Could VMware face a similar fate?
What's next?
As the acquisition finally unfolded, Broadcom paid a 44% premium on VMware stock, including $8 billion in VMware debt.
Broadcom has an aggressive goal: double VMware's profits in 3 years. Broadcom already announced those inevitable layoffs--2,800 VMware jobs are gone. The start of this acquisition is rocky and indicates that IT teams should consider acting on their backup plan to transition away from VMware.
But don't worry too much! The Broadcom Software Group will rebrand as VMware.
The Big Questions
Despite the brain drain that preceded the acquisition, the IT community now eagerly awaits the unfolding of Broadcom's strategy.
Will Broadcom...
reshape the pricing structure?
increase software license costs?
halt investments in VMware's cutting-edge work on container orchestration with Tanzu?
Next Steps
In this tale of disruption and uncertainty, digital infrastructure owners and VMware customers find themselves at a crossroads.
The winners and losers are yet to be determined. However, I think its clear the only winners in this deal are Broadcom shareholders. When it comes time to pay for virtualization software, IT teams best brace themselves for a change.
Be prepared, for the once-predictable world of virtualization may be entering a new era under the influence of Broadcom.