Broadcom’s $61 Billion Takeover of VMware Approved by EU Regulator, Setting the Stage for Industry Shake-up

In a landmark development that could reshape the technology landscape, Broadcom, the US semiconductor giant, has received approval from the European Union regulator for its acquisition of leading virtualization technology developer VMware. The staggering $61 billion deal, initially announced by Broadcom in May 2022, has been subject to an antitrust investigation, and the approval comes with certain requirements.

The Broadcom-VMware deal, financed through a combination of cash and Broadcom’s own stock in a 50/50 split, is positioned as one of the largest technology acquisitions in history. While trailing slightly behind record-holders Dell and EMC ($67 billion) and the ongoing Microsoft/Activision Blizzard ($68.7 billion) deal, Broadcom’s move is set to make waves in the industry. Notably, the Microsoft/Activision Blizzard acquisition is expected to conclude imminently.

The European Commission’s investigation concluded that Broadcom’s dominant market position had limited potential for abuse and that certain measures would ensure healthy competition going forward. The Commission determined that Broadcom did not possess a strong enough position to hinder competition in the networking and storage market and found no evidence of restrictive cooperation with AMD and NVIDIA.

The association of VMware with Broadcom software was deemed unrealistic, unlike the concern of limiting compatibility of Fibre Channel adapters with VMware products to squeeze out long-time rival Marvell. To address this, the EU regulator has mandated that Broadcom provide third-party companies with driver source code and tools to create compatible Fibre Channel adapters. This requirement aims to ensure that companies can guarantee the proper functioning of their hardware with VMware’s server virtualization technologies.

Broadcom has already obtained approvals for the VMware acquisition in several countries, including Australia, Canada, and South Africa. However, the deal is still undergoing review by two meticulous regulators, the US Federal Trade Commission (FTC) and the UK’s Competition and Markets Authority (CMA).

The significance of the Broadcom-VMware deal and its potential implications for the industry cannot be overstated. The integration of VMware into Broadcom’s portfolio represents a significant boost to the software business of the semiconductor giant, which directly competes with Qualcomm. VMware, previously owned by Dell before a separation in 2021, specializes in cloud computing and virtualization technology, and stands as a leading provider of virtual machines alongside rival Citrix.

Broadcom’s prominence as a semiconductor powerhouse, with its chips widely used in smartphones from Apple and Google, as well as Wi-Fi/Bluetooth adapters in various devices, adds to the significance of this agreement. The merger of VMware and Broadcom is expected to fuel a focus on enterprise software organization and cloud computing within the combined entity.

Broadcom’s recent acquisition spree further highlights its aggressive approach to expanding its assets. Notably, the company acquired security and database software maker CA Technologies for $18.9 billion in 2018 and, in 2019, acquired Symantec’s enterprise security division for $10.7 billion. In a subsequent move, Broadcom sold Symantec’s business to Accenture less than a year later, with the deal amount remaining undisclosed. Broadcom’s previous attempts to acquire competitor Qualcomm were thwarted by Donald Trump’s intervention, citing potential national security risks.

As Broadcom’s takeover of VMware gains momentum, industry players are keenly watching for the outcome of regulatory reviews by the FTC and the CMA. The finalization of this deal could set the stage for a major shift in the technology landscape, shaping the future of enterprise software and cloud computing