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Dell: Previous VMware Agreement Protects Relationship Post-Broadcom

‘We have a commercial framework agreement that we negotiated with VMware as we did the spin last year. And we would expect that that continues,’ says Tom Sweet, Dell’s executive vice president and CFO.

Dell Technologies said it expects its close relationship with VMware to continue after Broadcom closes its $61 billion acquisition of VMware despite Broadcom’s plan to take the 1,500 largest accounts of the combined company direct.

Dell, along with rival Hewlett Packard Enterprises, have traditionally been the biggest resellers VMware virtualization, cloud, and hyperconverged infrastructure technology through their vast channel partner networks, and the move by Broadcom is raising concerns among channel partners that VMware’s channel focus could change.

Broadcom Software Group President Tom Krause Thursday said in a call with analysts that Broadcom is ready to “embrace the channel” after it acquires VMware despite how it dealt with previous acquisitions like CA and Symantec.

[Related: It’s Official: Broadcom To Acquire VMware For $61B]

However, during that same conference call, Broadcom President and CEO Hock Tan said that the acquisition of VMware will allow his company to extend its list of strategic accounts to 1,500 companies compared to the current 600.

“That will be direct focus and a lot of attention and support [to] drive revenue growth and adoption of the various new products and software stacks that VMware has, especially in the realm of private cloud and software-defined networks. ... We will now have a larger core group of global 1,500, and we call it that, where VMware and its scale will now enable us to focus as we had focused on the last 600 before,” Tan said on the call.

For the channel, a big question hovering over Broadcom’s VMware acquisition is how it will affect VMware’s software licensing relationships with Dell Technologies and Hewlett Packard Enterprise.

“We need to understand what their strategy is with those alliance partners that we buy through,” said a sales executive for a solution provider who requested anonymity.

On Thursday, during Dell’s first fiscal quarter 2023 financial analyst conference call, one analyst asked about Tan’s comment about concentrating on direct sales to Broadcom’s top 1,500 customers and how that might impact Dell which derives a meaningful part of its revenue through VMware.

Tom Sweet, Dell’s executive vice president and CFO, replied that while Dell is not part of the transaction between VMware and Broadcom, Dell does have a 20-year relationship with VMware.

“As you know, with all of the work that’s been done with them and the close collaboration over the last five years or so and the whole posture around VMware is first and best as we lead, our expectation is that that relationship continues,” Sweet said. “We have a commercial framework agreement that we negotiated with VMware as we did the spin last year. And we would expect that that continues. And the mutual benefit that we both receive from the commercial framework with the go-to-market reach we have in some of our technology and our benefit with some of their solution technology should continue. So, that’s our expectation as we look at it today.”

When another analyst asked whether there is some sort of legal merger and acquisition clause in the Dell-VMware agreement that would be need to renegotiated if the acquisition closes, Sweet said the commercial framework between the two should continue as before.

“I guess I would just tell you that I‘m not going to get into all the commercial framework terms, but there is a change in control provision that allows that the commercial framework continues on with the change in control,” he said.

Steve Burke contributed to this article.

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