The 10 Biggest VMware News Stories Of 2022
On April 26, Broadcom CEO Hock Tan’s assistant called Michael Dell’s assistant to make an appointment, and that is how VMware’s biggest news story of 2022 began.
The biggest news to hit VMware this year came in May when Broadcom CEO Hock Tan stepped forward with a $61 billion offer for the company that had just declared its independence.
Broadcom’s takeover is now in the hands of regulators in the U.S. and Europe. In Europe, regulators have set a deadline for later this month to issue an initial opinion on the deal. In the U.S., the Federal Trade Commission is five months into what’s called a “second request” investigation of the deal.
Broadcom said it is not surprised by the attention from officials. VMware has aroud 200,000 customers inside the largest corporations and in sensitive areas of government who rely on the virtualization software for mission-critical work. That, plus the size of the deal, was always going to require a longer time frame. Since the first annoucnement, Broadcom has set a deadline of Oct. 31, 2023, to complete the deal.
One thing that has remained constant this year has been VMware’s stock price, which has yet to reach the $142.50 premium that Broadcom is promising shareholders if the deal goes through. Rather, shares topped out at $131.99 on June 3 and have hovered around the low $120 range since.
Along the path to 2023, VMware also made some big announcements of its own, pushing out Project Monterey, its yearslong collaboration with Nvidia to introduce a DPU that can bring AI processing to the edge. Updates to VMware’s partner program also were unveiled, enhancements designed to increase the expertise of VMware partners and introduce them to greater opportunities.
Here are the 10 biggest VMware news stories of 2022.
10. Golden Parachute
In the event that VMware’s top five leaders decide to move on from the virtualization all-star, Broadcom has arranged a $169.4 million compensation package for the top five executives. CEO Raghu Raghuram will receive the lion’s share of the deal, with cash and equity worth $52.5 million.
The current leadership team has not said whether they plan to remain at VMware post-close. In Securities and Exchange Commission filings, Broadcom has said none of the current leadership have begun negotiating to remain at the company post-close. Meanwhile, VMware President Sumit Dhawan told CRN in August he could not say whether he or Raghuram would stay.
9. SEC Fines VMware
The SEC fined VMware $8 million for its practice of carrying over sales made one quarter into the next in order to satisfy the estimates it had provided to analysts.
In fact, VMware would have missed its earnings targets numerous times since May 2019 if it had not shifted “tens of millions of dollars” in revenue into future quarters and “obscured” a slowdown in demand for its products from investors, all in violation of the U.S. Securities Act, according to a settlement reached with VMware earlier this year.
The SEC issued a “cease and desist order” to force the Palo Alto, Calif.-based virtualization leader to stop the practice of “discretionary holds” where a company withholds reporting all of its revenue until the following quarter so that its sales teams are given a “buffer” to meet future targets.
8. Some Channel Leaders Depart
VMware’s channel partners got a couple of shocks over the summer when two longtime channel stalwarts left the company amid the takeover by Broadcom.
VMware’s channel chief, Sandy Hogan, departed to become CRO of SADA Systems, while Vice President and Channel Chief of the Americas Bill Swales is now vice president of commercial sales, North America with Lenovo.
7. New Channel Leaders Emerge
VMware didn’t wait for the dust to settle before it named replacements to lead its channel sales efforts.
VMware promoted Ricky Cooper to vice president and head of VMware’s Worldwide Partner and Commercial Organization, replacing the role vacated by Hogan.
Cooper told CRN that channel partners will have more opportunities to succeed in more areas with VMware’s enhanced partner program, Partner Connect 2.0.
The company also elevated Tara Fine to become the Americas channel chief for VMware. Both are longtime leaders who came from inside the company. Fine said she is looking forward to being a trusted adviser with partners.
“For me, I just couldn’t be more excited about that,” she said. “I am committed to continuing to listen to our partners.”
6. Some Top Executives Leave Amid Takeover
Earlier this month, VMware disclosed via an internal memo that three top executives in critical areas like cloud and network security would leave: Mark Lohmeyer, Ajay Patel and Tom Gillis. All three were trusted leaders with the company, having talked about VMware’s strategy for growth with CRN in the past.
VMware said that thanks to its “deep bench” of talent, the company was able to shift executives into the critical roles.
Gillis’ role in VMware’s Networking and Advanced Security Business Group will be taken by Umesh Mahajan. He is currently senior vice president and general manager of the Networking Security Business Unit.
Lohmeyer’s role in the Cloud Infrastructure Business Group will be filled by Krish Prasad, senior vice president and general manager, Cloud Infrastructure Platform.
Patel’s role as general manager of applications and management business will be filled by Purnima Padmanabhan. Padmanabhan has been with VMware for six years. She is now the senior vice president and general manager, cloud management.
5. Shareholders Approve Broadcom’s Takeover
The outcome might have been a foregone conclusion with the single largest shareholder, Michael Dell, already committing his stock to vote in favor of the deal. However, millions of VMware shares were cast and counted in November to determine if a deal with Broadcom would pass a vote. It did. In all 99.61 percent of the company’s shares—some 352 million—were cast in favor of the deal, with 681,000 opposed.
One area that received a bit of pushback was the $169.5 million compensation for VMware executives.
The owners of more than 4.2 million shares opposed the pay — or 1.2 percent of the total votes cast — while 348.2 million shares voted to approve the golden parachute.
4. Price Increase Worries
Raghuram told a room full of VMware partners in October,that if they are worried about price increases under a looming Broadcom ownership they should tell customers to “renew now.”
Meanwhile, Tan has been driving home the message that he has no plans to increase VMware’s prices should a takeover happen. One thing is certain, according to Gartner analyst Andrew Lerner, customers are worried about higher prices.
3. Edge AI Processing Now Possible With VSphere 8
The goal of Project Monterey—a partnership with Nvidia that created vSphere 8 and vSan8—wasn’t to increase the available compute cycles in data centers or reduce their power consumption.
While both of those data points were achieved as a result, the true goal of vSphere8 is to prepare the data center for the huge workloads of the future, according to Raghuram.
“‘vSphere 8 and vSAN 8 took two years to build. It’s a momentous new version. And it sets the foundation for the next decade of modern computing,’ he said.
2. The New Partner Connect
VMware said it has identified three areas that show up among thousands of its most profitable partners that it wants all partners to now focus on: services, life-cycle profits and stickiness.
Tracy-Ann Palmer, VMware’s vice president of partner experience, programs and investments, told CRN the company wants to drive more sophisticated, higher-value work through the channel.
“Our most profitable partners are doing three things differently,” Palmer said. “They are driving and selling advance complex services. They are focusing on the entire life cycle of the customer. Robust customer success, methodologies, frameworks, organization in place and driving it, right through from resale all the way through. If you talk to any of our top partners, they will tell you it is that continuum that is driving their margins. The third piece is the stickiness.”
The program refresh is also bringing changes to how partners increase incentives. It is doing away with tier credits and incorporating a point system to streamline how it ranks partners, which can also be useful to orient a partner’s business model around growing its VMware business into areas with higher profitability for the reseller.
1. The $61 Billion Takeover
What followed was a fast-paced month of meetings, phone calls, offers and counteroffers that launched the potential merger of Broadcom and VMware.
Early in the morning on May 26, one month to the day after Tan’s assistant had called Dell’s assistant to set up a meeting, the VMware board of directors voted unanimously to approve the deal and recommended that shareholders do the same. VMware and Broadcom then publicly announced the merger agreement.
Tan, along with then-Broadcom Software Group President Tom Krause, held a call with investors and talked about the opportunities Broadcom saw with VMware, including a chance to “embrace the channel.”
Partner worry immediately followed the announcement.
VMware CEO Raghuram worked to set partners’ minds at ease during a talk with CRN in October when he said they should expect more empowerment under the new leaders. Tan, meanwhile, has repeatedly vowed that Broadcom will embrace the channel to help the company manage VMware’s 200,000 users.