What VMware’s Top Execs Are Saying About The Broadcom Deal
Top VMware leaders are speaking out after the blockbuster announcement that the company is being acquired by Broadcom. Here’s what they had to say.
The $61 billion deal for VMware is on track.
As a 40-day “go-shop” provision dwindles, with no signs yet that any bidder beside Broadcom is interested in the virtualization software star – a takeover is looking more likely.
To ease employees into a transition to a new company, VMware executives hosted a town hall where they took select questions from employees and shared their own thoughts on the deal.
Among those talking were Michael Dell, chairman of the VMware board, whose Dell Technologies spun out VMware last November; VMware CEO Raghu Raghuram; VMware president Sumit Dhawan; Chief Financial officer Zane Rowe; and Chief People Officer Betsy Sutter.
While the human resources officer stayed optimistic, and positive about such a deal, Raghuram and Dhawan were more sober and pointed out Broadcom’s history with acquisitions as a reason employees could be concerned.
VMware held the town hall meeting on Friday May 27, and published a transcript of what was said on June 1.
The merger has partners on edge, as Broadcom’s checkered channel past has come back into the spotlight. However, Broadcom has pushed back saying it has learned its lessons from the previous acquisitions of CA Technologies and Symantec. Krause told investors that this time they are interested in the long tail of VMware sales, and plans to “embrace the channel.”
Krause has taken to a commercial on LinkedIn to promote Broadcom’s history of investing in research and development.
Broadcom’s CEO Hock Tan, and the president of Broadcom Software Tom Krause spoke to VMware employees that same day in a virtual town hall, yet Broadcom has yet to post a transcript of their encounter with VMware employees. Instead, they published a letter that contained a reference to what was said.
Here is what VMware executives had to say about the deal during the company’s town hall meeting.
Raghu Raghuram -- Chief Executive Officer
This really is the fundamental flagship acquisition for Broadcom in terms of its software strategy. Just like when they went from Avago to Broadcom on the hardware side, their goal is to go from Broadcom software, to VMware being their software business on the software side. So what Hock Tan their CEO sees is they’ve got a semi business and they’ve got a software business, the software business is centered all around VMware.
So it’s a remarkable validation of all of the work that we’ve done. All the work that you’ve done. And the $70 billion of enterprise value represents an amazing amount of value for what you’ve done. And that’s why Broadcom is paying so much money.
Now, Broadcom itself, what they want to do is they want to come in with a pretty open-mind. They realize that we have run a very, very successful company over the last 20 plus years. And they want to understand our go to market. They want to understand our product portfolio.
And one of the key tenets is to invest very, very heavily in innovation. That’s what their track record is. They’ve invested more in R&D innovation compared to the revenue they generated. So that’s really what they want to do with this asset as well—make VMware, the flagship innovation brand on the software side, just like they’ve got Broadcom as the flagship innovation brand on the hardware side. So that is the intent of the company.
Michael Dell -- Chairman Of The Board
I too am excited about the prospects of this transaction for many reasons. You all at VMware have been shaping the IT industry for the past two decades. And the company’s innovations have helped customers thrive and you continue to drive innovation and unwavering support of your customers.
And I believe that following the close, by combining the complimentary Broadcom software portfolio and Broadcom’s broader business with the leading VMware platform. VMware as the broader software capability within Broadcom is going to provide customers with an expanded platform to continue to enable critical infrastructure in public clouds, private hybrid clouds at the edge, and helping our customers accelerate their digital transformation.
Broadcom, as you are going to be learning about, is a technology company. A company that invested, on its own, $4.9 billion in R&D last year, has over 19,000 patents and more to come on all that. But I’m excited to see these two innovation-centric and engineering-centric, focused companies come together and looking forward to all the great things that the new company is going to be able to do for customers.
Sumit Dhawan -- President
The reason why they’re acquiring a sizable premium on top over the current stock price is because they value our broad portfolio and amazing customer relationships with the values we have in terms of helping customers and driving innovation. And they think that they want to have investment across all of those three things. So that’s sort of their philosophy in terms of customer concerns.
At this point in time, it’s business as usual for us. We are going to be able to do our entire broad portfolio, pursue our strategy with customers, take them forward from everything we have heard from Broadcom. They don’t intend to have any significant adjustment in our product portfolio strategy, which makes us being able to do business with customers in a similar fashion. I do understand it will cause some additional complexities and we’ll work out the process for it.
For the team members, anyone who’s engaged with building amazing customer relationships, servicing the customer, that’s a huge value to Broadcom. So of course, we are going to work with Broadcom on addressing how the operating model is going to work on the go-to-market front. But one of the key things that they’re looking for is know-how, business relationships and business model on go-to-market front for software businesses that they already own and potentially may acquire over time through their model, which is something that we bring to them.
So let’s not assume, I would say, at this point in time that just because they have done what they have done with Symantec and CA is something that they intend to do with VMware because we’ve heard quite the opposite so far. But we’ll get some more certainty over the course of next 60 to 90 days. That is the key.
Zane Rowe -- Chief Financial Officer
The rumors have been circulating all week. So the way to think about it from the trading side is to really look at our unadjusted price, which was where we traded probably last Friday, which I would say is about in the mid-$90s.
So while we haven’t had direct engagement with our shareholders, as you see, the stock has reacted favorably, as well as the Broadcom stock getting back to a band where they were trading preannounce as well.
So generally, as deals go, you would expect to see a gap between where you’re trading currently and the offer price and part of that’s timing and deal dynamics and a number of variables that go into that. But I would say, it’s trading as you would expect given the announcements and given the opportunity here for, for both companies.
Betsy Sutter -- Executive Vice President and Chief People Officer
I think it’s quite exciting that Broadcom wants to create a software division, a software franchise and I think there’s huge opportunities for us there obviously. The conversations that I’ve had to date with Broadcom, they are very interested in all things employee. They are very interested in our talent. We’ve had a lot of conversations and I’m seeing questions blow up on every spectrum of this and I promise to get you answers to all these questions with regard to the pay cycle yes, that’s being launched and we’ll go into full swing. In terms of the equity refresh cycle yes, that’s being launched and we’ll go into full swing. Broadcom, completely supportive and understanding about that.
Remember it’s business as usual right now. And then we’ve also talked about various other strategies in terms of keeping people engaged and at VMware. So all good, all good so far in terms of how we’re moving forward with our current programs. But we have yet to redefine what the future looks like and we’ll do that with Broadcom.