Broadcom and VMware deal uncertainty could impact customer base of both companies

With the UK’s Competition & Markets Authority (CMA) deepening its probe into Broadcom’s acquisition of VMware, which could create, on paper, an unfair competitive playing field in the server market, the growing uncertainty around the deal will have on the customer base of both companies, according to an analysis conducted by GlobalData, a leading data and analytics company.

Rajesh Muru, Principal Analyst at GlobalData, says: “VMware is an established player with a solid foundation and strategy. Therefore, for this deal to work, irrespective of the regulatory concerns on fair play, it will be critical that Broadcom maintains VMware’s brand equity and enables the business to operate with a level of autonomy.”

GlobalData’s analysis finds that there is an element of a conglomerate effect created by the potential Broadcom and VMware deal in the server segment. VMware also brings more to the table than Broadcom with its strong cloud and virtualisation capabilities that could create conflicting supplier issues for other players.

Muru observes: “Other areas of the Broadcom and VMware businesses covering cybersecurity will, in our view, be less of an issue due to the relative market positions of both players in the segment, and existing portfolio overlap in areas like Broadcom’s (Symantec) product lines across SASE and XDR.”

According to GlobalData, the global server virtualisation market is estimated to be worth over $15bn by 2030, with a compound annual growth rate (CAGR) of 7-8%, influenced by demand from high-speed data centres and increased cloud computing adoption; and so in the long-term, the deal could have an impact and affect the competitive playing field in the server virtualisation space (which includes players like Oracle, Amazon, Google, Huawei, IBM, Citrix and Microsoft).

Muru concludes: “It is 50/50 whether or not this deal goes through, as the CMA move could create a real hurdle for Broadcom. But what the market fails to acknowledge is that the effects of the continued uncertainty surrounding the deal could potentially damage, for example, VMware’s brand equity, as there are significant numbers of VMware customers grappling with the situation as they consider their current and future VMware investments.”