VMware is set to be acquired by Broadcom for $60 billion in a deal that is yet to be announced.
According to the Wall Street Journal, VMWare is scheduled to report its Q1 2023 results on Thursday and it may also make the announcement. Our efforts to reach VMware bore no fruit as they declined to comment on the rumour and speculation.
Shareholders of the New York Stock Exchange (NYSE) have expressed differing opinions about the proposed acquisition. During Monday trading, Broadcom’s share price fell 3 per cent while VMware’s rose by almost 25 per cent.
Until this share price spike, VMware had been underperforming on the NYSE over the past six months. A $60 billion price tag, at $140 per share, would represent a premium on VMware’s recent share price but would be around $4 billion short of VMware’s theoretical value at the time it was spun out of Dell in November 2021.
However, VMware arguably has more upside than the software portfolios Broadcom acquired with Symantec and CA Technologies. Adoption of multi-cloud and edge are surging, creating a need for a consistent operating, network, and security overlay. The company’s core computes virtualisation business remains robust, even as containers and serverless applications become more common. 5G represents an enormous opportunity for the company.
If Broadcom were to buy VMware, it is unclear how those advantages would be preserved.
Perhaps Broadcom would run VMware as an independent business, just as EMC and Dell both did. That arrangement didn’t stop VMware from growing both in revenue and influence – the company set technical agendas that the entire storage industry adopted, and nudged the networking industry towards cloud fare.
Maybe chip-design titan Broadcom could pull off the same trick. VMware has also shown it can partner closely with an owner without scaring away other close partners – Dell’s ownership and inside access to VMware tech didn’t stop the likes of HPE, IBM, and Lenovo from continuing to do business with the virtualisation giant. Broadcom could integrate VMware with its 5G, SmartNIC, and arm-based processor businesses, and otherwise keep it credibly independent.
An important thing to note: VMware’s closest direct rival Nutanix today saw a five per cent jump in its share price.