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Broadcom’s VMware Acquisition: 5 Key Customer And Cost Figures To Know

Mark Haranas

From what each company spends on sales, marketing and administrative costs to R&D spending, here’s five comparable figures that all channel partners, investors and customers should know as Broadcom seeks to buy VMware for $61 billion.

R&D Percentage Of Revenue: Broadcom 15% Versus VMware 25%

VMware spends a larger percentage of its revenue on research and development compared to Broadcom.

For its most recent first quarter, VMware spent $774 million on research and development (R&D). This R&D cost represented about 25 percent of VMware’s total $3.09 billion in revenue.

Comparatively, Broadcom spent $1.26 billion on R&D to achieve its $8.103 billion in total sales for its recent second quarter. Broadcom’s R&D costs represent approximately 15 percent of the company’s total revenue.

It is key to note, that Broadcom CEO Hock Tan and Tom Krause, President of Broadcom’s Software group, sent a letter to VMware staff expressing admiration for VMware’s “engineering-first, innovative-centric culture.”

“Over the last several years, we’ve been executing on our strategy to build the world’s leading infrastructure technology company, by both investing in R&D and integrating established, mission-critical platforms, like Symantec, CA Technologies and now VMware, into our company,” said the letter. “We’ve long admired VMware for your enterprise software leadership. In fact, one of the reasons why we became interested in this transaction was because of your world-class team, known for engineering prowess and strong customer and partner relationships. Like VMware, Broadcom has an engineering-first, innovation-centric culture.”

Key takeaway: There have been fears among channel partners that Broadcom’s takeover of VMware will cause VMware’s innovative-driven market strategy to be cut down in order to increase profitability. It appears that Broadcom will, in fact, focus its investment on VMware’s core, mature product lines.

“In terms of R&D, we’re going to reinvest back in the core business, the core franchises,” said Broadcom’s Krause during a call with media and analyst last week. “If you think about the three different pillars of this business, it’s really the core infrastructure business—vSAN, vSphere, vRealize—these are the businesses that are core to driving the bulk of the revenues. And that’s where the reinvestment is going to occur.”

 
Mark Haranas

Mark Haranas is an assistant news editor and longtime journalist now covering cloud, multicloud, software, SaaS and channel partners at CRN. He speaks with world-renown CEOs and IT experts as well as covering breaking news and live events while also managing several CRN reporters. He can be reached at mharanas@thechannelcompany.com.

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