Dell Technologies Killed ‘Significant And Complex’ Five-Year Deal With VMware, Two Years Early

Dell represented VMware’s “largest route-to-market” and it has generated $17.3 billion in sales for the virtualization giant, as of November 2023, according to SEC filings. But Dell nixed the deal that hauled in that revenue last week.

Dell Technologies has generated at least $17.3 billion in revenue for VMware since 2021, and it annually provided nearly 40 percent of the virtualization giant’s sales through an ongoing partnership that was meant to last until 2026, according to regulatory filings.

Dell said last week it has killed the deal, a move that came two years before it was due to expire. Dell cited a clause that allowed it to exit the agreement within 60 days of a change of ownership.

VMware was acquired by Broadcom in November. Dell told Broadcom of its intent to cancel the agreement on Jan. 25, it wrote in a U.S. Securities and Exchange Commission filing. In a statement to CRN, after the announcement, Dell said it would continue to do business with VMware, including through its popular VxRail product.

“Broadcom and VMware solutions remain a part of Dell’s portfolio of products, including embedded solutions such as VxRail and Carbon Black,” Dell said. “Broadcom is an important and valued partner of Dell Technologies, and we will continue to deliver value to our customers and partners who select Broadcom and VMware solutions.”

Ricky Cooper, Broadcom’s VP of OEM, said co-engineered products would continue to be sold through all of its vendor partners. However the pricing and licensing agreements between VMware by Broadcom and those vendors would change.

“So now it's going to be a very level playing field, and this is a very important point: it will be a level playing field where everybody has the ability to participate. And the best solution for the customers will win,” Cooper told CRN last week.

As they prepared to part ways after five years together, Dell and VMware struck a deal in November 2021 that was meant to preserve Dell’s status as VMware’s leading route to market, for five more years, the 2023 annual report stated.

VMware called the relationship with Dell that contributed so much revenue, “significant and complex” in its final annual report as a public company.

“Our commercial relationship with Dell is significant and complex. During the time in which we were a majority-owned subsidiary of Dell, the portion of our sales that were realized through the Dell sales channel grew more rapidly than our sales through non-Dell resellers and distributors,” VMware wrote in its 2023 annual report. “As a standalone company following the Spin-Off, we continue to transact a significant amount of business with Dell pursuant to the commercial framework agreement between us and Dell that became effective upon the Spin-Off.”

VMware revenue through Dell climbed every year, records show, from $4.05 billion in the year ended January 2021, to $4.76 billion the following year, to $5.03 billion, by February 2023. Dell’s proportion of VMware’s revenue also grew from 35 percent of its revenue in 2021, to 38 percent by February 2023.

Since Broadcom closed its deal for VMware in November, the full year of Dell’s revenue contribution to VMware for 2023 is not available. In a filing on Feb. 8, Broadcom provided the previous nine months of sales through Dell, which show VMware received $3.5 billion, 38 percent of VMware’s total consolidated revenue.

CRN has reached out to Broadcom for comment.