Broadcom eyes up multi-billion dollar deal for VMware
We could be about to get another tech mega-merger
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The technology industry could be set for its next huge M&A deal after aBloombergreport, corroborated byReutersand others, suggests that Broadcom is in talks to acquire VMware.
The sourcesBloombergspoke to caution that “discussions are ongoing and there’s no guarantee they will lead to a purchase”. VMware is currently valued at around $40 billion on public markets, although its stock has risen considerably on news of this deal, giving the company a market cap of around $46 billion.
Acquiring VMware would represent the latest in a series of acquisitions for Broadcom, which is valued at around $222 billion.
VMware deal
For its part, VMware wasspun offbyDellin a $64 billion deal in November 2021, creating an independent company focused on virtualisation and cloud tools.
Broadcom predominantly focuses on hardware, making components for the iPhone, industrial equipment, and much more. It is, in this sense, an old school conglomerate.
But the company has been increasingly focused on data centres and acquiring VMware offers the company a chance at making both the hardware and software for the cloud’s infrastructure.
Both VMware and Broadcom had no comment forBloomberg.
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Diversification
As you can imagine for a chip company, the global chip supply shortage has been difficult for Broadcom.
ABloombergreportfrom October 2021 saidApplehad been forced to cut iPhone 13 production targets by 10 million units in part due to a shortage of Broadcom components.
Research showed that chip lead times at Broadcomgrewfrom 12.2 weeks in February 2020 to 22.2 weeks in March 2021, reflecting broader struggles in the industry.
US court grants Apple and Broadcom new trial in billion-dollar patent case>Broadcom accused of abusing dominant position in the US>Marvell takes on Broadcom with billion-dollar Innovium deal
From this perspective, buying VMware makes a lot of sense: it is a software business, meaning that margins and profits remain largely unaffected by macro trends in supply chains.
Broadcom’s recent $20 billion bid for SAS, which sells businessinteland data management software,fell throughat the final hurdle, perhaps creating an appetite for a mega deal.
Max Slater-Robins has been writing about technology for nearly a decade at various outlets, covering the rise of the technology giants, trends in enterprise and SaaS companies, and much more besides. Originally from Suffolk, he currently lives in London and likes a good night out and walks in the countryside.
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