‘It’s Becoming A Distraction:’ Top VMware Partners Weigh In On Broadcom Deal Delay
‘From a sales perspective, I wouldn’t say it’s holding up deals, but I certainly wouldn’t be shocked if the Citrix route started to become more attractive to organizations forecasting what their future tech stack looks like,’ one VMware partner told CRN.
Some of VMware’s biggest channel partners have told CRN that their biggest customers are “paying more attention” to the delay of the $61 billion deal with Broadcom as China, the final regulator needed to greenlight the merger, holds back its approval.
“Our larger customers that heavily adopt enterprise VMware products are certainly paying much more attention to it because the outcome and direction can sway a piece of their core IT business,” said one VMware partner who, asked not to be named. “Smaller customers without as many workloads don’t pay as much attention since they rely much more on their outsourced IT arms to help them navigate this territory. It will be interesting to see how this plays out, but it’s becoming a distraction for organizations as [they are waiting for direction].”
San Jose, Calif.-based Broadcom announced its intention to buy VMware in May 2022 in a 50-50 cash, stock split that would see VMware shareholders receive $142.50 premium for their shares or an equivalent value of Broadcom stock. At the time, CEO Hock Tan said the deal would close by the end of Broadcom’s fiscal year, October 30, 2023.
However, in filings, Broadcom set the outside date—the date by which either party can walk away from the merger—at Nov. 26, which is about two weeks away.
CRN reached out to VMware for comment but did not hear back as the company’s offices are closed for Veterans Day. A request for comment to Broadcom was not returned as of press time.
One larger partner said some customers have “adjusted their plans” in the wake of the uncertainty that Broadcom’s deal has brought, while VMware’s biggest rivals are only too willing to reassure them.
“Customers and partners have had time to think about the impact and ramifications of the merger on their IT environments, and they are adjusting their plans accordingly based on their perceived level of risk,” said the partner, who asked not to be named. “Nutanix continues to be vocal about the merger, as they are positioned to realize a benefit from customers who decide to move off of the VMware platform.”
Another partner expects some customers to begin looking at Cloud Software Group, the VMware rival created by the merger of Citrix Systems and TIBCO Software that is headed by CEO Thomas Krause. Krause was president of Broadcom’s software group and was expected to lead that unit when it took over VMware, but he quit suddenly in July 2022 and took his current position.
Nutanix meanwhile is led by former VMware product officer Rajiv Ramaswami. With such knowledgeable adversaries outside of its gates, one VMware partner said it is critical for the company to maintain its engineering and development edge.
“VMware’s suite continues to progress and go through version upgrades as it always has,” the partner said. “From a sales perspective, I wouldn’t say it’s holding up deals, but I certainly wouldn’t be shocked if the Citrix route started to become more attractive to organizations forecasting what their future tech stack looks like.”
However, one bright spot that a different larger partner pointed to is that their VMware business has not been negatively impacted by the uncertainty.
“I think there is some distant looming concern about a reduction in quality or innovation from Broadcom, but the consensus seems to be that it is too early to consider it strategically,” the partner said. “There are a number of competing priorities, such as moving to various cloud platforms, that would mitigate the risk. It could be a few years before the impact of this acquisition is tangible from an innovation and quality perspective.”