Broadcom-VMware Deal To Close Wednesday
‘Broadcom Inc. and VMware, Inc. today announced that they have received all required regulatory approvals and intend to close Broadcom’s acquisition of VMware on November 22, 2023, according to a statement Broadcom released Tuesday morning.
Broadcom and VMware will become one company Wednesday, 546 days after Broadcom unveiled its intention to buy the virtualization company.
China finally agreed to let the merger pass, according to an early morning Tuesday announcement from Broadcom.
“Broadcom Inc. and VMware, Inc. today announced that they have received all required regulatory approvals and intend to close Broadcom’s acquisition of VMware on November 22, 2023,” according to a Broadcom release. “Broadcom has received legal merger clearance in Australia, Brazil, Canada, China, the European Union, Israel, Japan, South Africa, South Korea, Taiwan, the United Kingdom, and foreign investment control clearance in all necessary jurisdictions. There is no legal impediment to closing under U.S. merger regulations.”
China added some drama to the closing frames of the 78-week $61 billion saga, as it withheld its merger approval behind a regulatory process that pushed out the deadline Broadcom CEO Hock Tan had wanted by three weeks from Oct. 30 to Nov. 22.
The lone regulatory holdout, China was pleased by the progress it made at the Asia-Pacific Economic Cooperation conference toward trade regulations and cementing business partnerships with the U.S., analysts told CRN. Meanwhile, American business leaders, while still nervously guarding their IP, are eager to embrace Chinese markets, a dynamic that did not hurt the deal’s approval, analysts told CRN.
The analysts who spoke with CRN ahead of the news and who asked not to be named in order to speak frankly about evolving international relations, said China needs Broadcom’s networking products to remain competitive with other superpowers technologically. In addition, Broadcom does 30 percent of its business in China, a symbiosis that was too powerful for the deal not to happen, they said.
Also, one analyst said, for Tan it’s personal.
“Hock needs to get 50 pecent of Broadcom’s revenue to come from software. He couldn’t make Qualcomm happen. If he can’t get this deal through, there will be questions around how Broadcom gets there,” the analyst told CRN.
Broadcom and VMware each said Tuesday morning that they had no comment beyond the press statement that was released.
Tan, meanwhile, has said he plans to embrace the channel. Channel partners said they haven’t yet seen those signals indicating a hug is coming their way, but Tan has said he plans to immediately invest $1 billion in VMware R&D.
Earlier this month, VMware CEO Raghu Raghuram stood on the main stage in Barcelona at the company’s VMware Explore Europe and told the crowd that Tan was even more excited than he was when the deal was first unveiled.
“I can tell you without a doubt that he is even more excited about the potential of VMware going forward than he was last May,” Raghuram said.
Tan and Raghuram shook hands.
“It has been a long journey,” Tan told the crowd. “Having said that, it’s well worth it.”
Without addressing the regulatory barriers, he talked about his promises to VMware once the transaction is done.
“Going forward I’d like to speak to three commitments we will make to you, our customers. First, we will accelerate the pace of innovation through stepped-up R&D efforts. Next, we intend to invest much more in the VMware ecosystem, with our partners, the value-added resellers, the distributors, the OEMs, the managed service providers and, of course, the global systems integrators.”
Tan also vowed to tackle the complexity of VMware products, making them easier to consume.
With deep cuts expected in the VMware sales ranks, partners said they see increased opportunity to act as a stabilizing force for customers looking for help.
“Large strategic mergers such as this one, where we expect rationalization of sales teams and cost optimization initiatives, actually drive increased opportunities for partners,” said one partner, who declined to be identified in order to speak openly about the company’s business with VMware. “Customers look to us for guidance and we provide consistency of coverage in the chaos of change.”
If the deal closes, Broadcom is going to find $250 million in synergies among the VMware sales department, one analyst told CRN. “Hock has said, ‘We do not need a salesperson for every account. Not everyone gets a la carte offerings,’” the analyst said.
Tan has said that he wants to make VMware easier for customers to work with, repeating that message on stage at VMware Explore Europe last week. The analyst said Tan is willing to sacrifice direct sales account coverage to make that happen. The top accounts will continue to receive that direct sales coverage.
One VMware partner, who did not want to be identified, told CRN this matches what the company was told and if the deal closes sees this as a positive turn for partners under Broadcom.
“We are hearing that the top 500 accounts or so will be handled direct and everything else will go through the channel,” the partner said.
Another partner saw Tan’s language as meaning that VMware could take on the consumption model it uses with cloud products.
“When I hear ‘much easier to deploy and consume’ in addition to ‘invest in partners and resellers ...’ the first thing that comes to mind is better leveraging the cloud marketplace. VMware as is goes through a very traditional model of scoping, quoting, ordering. The cloud marketplace is a channel that better integrates OEMs, with partners, with customer solutions in a faster, easier-to-deploy model.”
There are dozens of unanswered questions around leadership and go-to-market that partners are eager to hear answers to. The deal has put into place a $169.5 million exit package for VMware leadership. VMware CEO Raghuram could elect to take a $52.5 million golden parachute Wednesday. VMware President Sumit Dhawan could get $24.4 million to leave.
Neither Raghuram nor Dhawan has answered CRN’s questions about whether they will remain once the deal is done. On Tuesday, CRN again requested VMware explain what leadership would look like after the deal closes. VMware declined to answer the question.
The deal gives a $22 billion windfall to VMware majority owner Michael Dell, the chairman, founder and CEO of Dell Technologies.