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Broadcom CEO Hock Tan’s Guide To Buying VMware In 30 Days
CRN takes you behind the scenes for a month of late-night meetings, phone calls, and the two conversations Michael Dell had at Davos that became footnotes to one the largest software deals of all time once it closes.
As Broadcom’s $61 billion bid for VMware inches towards a finish line of sometime next year, more details are emerging about the deal, including the other companies who were interested in the virtualization giant, VMware’s counter offer, which CEO Hock Tan refused, and the conversations Michael Dell had at Davos that played a part in creating the mega offer.
Broadcom filed a 309-page document with the U.S. Securities and Exchange Commission that laid out its rationale to shareholders for buying VMware. Included in the lengthy July text was day-by-day rehashing of the significant meetings and events, numerical figures and estimates, that played a role in shaping the deal.
According to this SEC filing, at least two companies other than Broadcom were interested in buying VMware during the go-shop period. Leaders at two separate companies also spoke with Michael Dell at Davos as negotiations between Broadcom and VMware intensified in mid-May.
The filing also gives the public a glimpse of the expected timeline of the deal. Broadcom initially wanted it to close within 15-months, however VMware asked for the longer 18-month window during negotiations. Broadcom has since repeatedly said the deal would close by October 31, 2023, about 18 months after it was announced.
During the days Broadcom negotiated with VMware over value, VMware disclosed its revenue projections for the next five years, out to 2027, estimating that it would grow from $13.35 billion in sales by the end of this fiscal year, to $18.93 billion by the end of 2027, according to the SEC filing.
VMware said it will achieve those numbers “fueled by subscription and SaaS revenue” which it plans to increase “from 26% to 37% in fiscal years 2023 through 2025, so that it accounts for 46% of the overall revenue mix in fiscal year 2025, the filing stated.
The moves would be in keeping with Broadcom’s goals for VMware, as Tan has said he too plans to quickly increase subscription revenue at VMware, once the deal closes.
Here is the account of how the deal came together, as stated by Broadcom in its July filing: