Semiconductor major Broadcom Inc will acquire cloud and virtualization company VMware in a cash and stock deal valued at $61 billion. Broadcom’s Software Group, which offers infrastructure and security solutions, will also be rebranded and merged within VMware. With this deal, Broadcom will also take over $8 billion of VMware’s net debt.
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The VMware deal will boost Broadcom’s footing in enterprise software, particularly hybrid cloud, a fast-growing segment with higher margins, said industry experts.
“Optimization of VMware on silicon directly will help in embedded applications. Broadcom already has Symantec which is strong in security and CA which is good at automation. With this acquisition, Broadcom comes across as a company with a strong set of tools for hybrid cloud, right from embedded chip, to network layer, to security, to automation and now virtualization,” said Sanchit Vir Gogia, chief analyst and chief executive of Greyhound Research.
Gogia further points out, that Broadcom has a very private equity mentality. “When it acquired Symantec it stripped down sales and operations and made the company a lot more profitable by focusing more on top paying clients. This can be a good thing for VMware as it can benefit from streamlining from a profitability perspective. Broadly, the go-to-market and integration of products will become stronger,” added Gogia.
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