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Will Broadcom Make VMware More Expensive? Five Players Weigh In

O’Ryan Johnson

VMware partners are confronting customers fears about future pricing under Broadcom with early renewals, exploring rivals, and leaning into the partner’s services.

VMware partner Winslow Technology Group’s chief technology officer, Rick Gouin, said the fear that Broadcom will raise the price of VMware takes one of two paths with his customers: renew or flee.

“I do have some customers doing that, actively renewing subscriptions to hedge against price hikes in the future,” he told CRN. “I also have customers who are evaluating alternative solutions so that they’re prepared and have the ability to move, if and when they need to.”

Broadcom CEO Hock Tan and VMware CEO Raghu Raghuram have each taken turns at addressing what Gartner has called “a very nervous VMware installed base.” Tan wrote about the pricing fears directly in a blog post Wednesday, calling it “top of mind” for customer. He assured them that Broadcom does not need to raise VMware’s prices in order to keep provide a “better product.” Gartner analyst Andrew Lerner told CRN Tan stopped short however of saying the company would not raise prices.

“This blog along with other public statement basically indicate that they don’t need to increase prices,” Gartner analyst Andrew Lerner told CRN. “The good news is it seems like Broadcom is not planning to run the CA/Symantec playbook verbatim, as it relates to pricing. However, to address a very nervous VMware installed base, this falls short of stronger statements like Broadcom won’t raise list prices for 12 months or something akin to that.”

[RELATED: Broadcom CEO Hock Tan On VMware: ‘We Can Offer Better Products Without Raising Prices’]

After a 20-day private courtship, Broadcom announced on May 26 it would buy VMware for a combined cash and stock transaction worth $61 billion. In his first remarks on the deal, Tan said Broadcom would reach $8.5 billion in EBITDA within three years. Since, in the trailing 12 months VMware has recorded $3.4 billion in EBIDTA, being able to more than double that had VMware rival Scale Computing speculate that such profitability could only come through layoffs or price hikes.

Here is what the stakeholders have publicly said or told CRN about VMware pricing if a Broadcom acquisition is completed:

 
O’Ryan Johnson

O’Ryan Johnson is a veteran news reporter. He covers the data center beat for CRN and hopes to hear from channel partners about how he can improve his coverage and write the stories they want to read. He can be reached at ojohnson@thechannelcompany.com..

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