![What can expect from the Broadcom Vmware mega deal? What can expect from the Broadcom Vmware mega deal?](https://varindia.com/storage/news/uploads/2018/02/62906920b04cf.jpg)
Broadcom has announced to acquire VMware for approximately $61 Billion in Cash and Stock. Broadcom’s purchase of VMware will help the company diversify away from its core business of designing and selling semiconductors into enterprise software, which can have larger margins.
The deal would be one of the largest technology acquisitions of all time, behind Microsoft’s pending $69 billion deal to purchase Activision Blizzard and Dell’s $67 billion purchase of EMC in 2016.
Broadcom brings together two engineering-first, innovation-centric cultures.Broadcom’s purchase of VMware will help the company diversify away from its core business of designing and selling semiconductors into enterprise software, which can have larger margins. VMware’s products are used by enterprises to more efficiently run their own servers as well as cloud servers. From now onwards, Broadcom Software Group to rebrand and operate as VMware .
VMware, a leading provider of multi-cloud services for all apps, pioneered virtualization technology, an innovation that positively transformed x86 server-based computing. VMware then created the software-defined data center and played a leading role in virtualizing networking and storage, before evolving to become a hybrid cloud and digital workspace leader. Today, VMware's multi-cloud portfolio, spanning application modernization, cloud management, cloud infrastructure, networking, security and anywhere workspaces, forms a flexible, consistent digital foundation on which the largest and most dynamic enterprises across industries build, run, manage, connect and protect their most important and complex workloads for the benefit of their customers.
Experts, feels that the combined solutions will enable customers, including leaders in all industry verticals, greater choice and flexibility to build, run, manage, connect and protect applications at scale across diversified, distributed environments, regardless of where they run: from the data center, to any cloud and to edge-computing. With the combined company's shared focus on technology innovation and significant research and development expenditures, Broadcom will deliver compelling benefits for customers and partners.
Hock Tan, President and Chief Executive Officer of Broadcom, said, "Building upon our proven track record of successful M&A, this transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software as we reimagine what we can deliver to customers as a leading infrastructure technology company. We look forward to VMware's talented team joining Broadcom, further cultivating a shared culture of innovation and driving even greater value for our combined stakeholders, including both sets of shareholders."
Raghu Raghuram, Chief Executive Officer of VMware, said, "VMware has been reshaping the IT landscape for the past 24 years, helping our customers become digital businesses. We stand for innovation and unwavering support of our customers and their most important business operations and now we are extending our commitment to exceptional service and innovation by becoming the new software platform for Broadcom. Combining our assets and talented team with Broadcom's existing enterprise software portfolio, all housed under the VMware brand, creates a remarkable enterprise software player. Collectively, we will deliver even more choice, value and innovation to customers, enabling them to thrive in this increasingly complex multi-cloud era."
Tom Krause, President of the Broadcom Software Group, said, "VMware has long been recognized for its enterprise software leadership, and through this transaction we will provide customers worldwide with the next generation of infrastructure software. VMware's platform and Broadcom's infrastructure software solutions address different but important enterprise needs, and the combined company will be able to serve them more effectively and securely. We have deep respect for VMware's customer focus and innovation track record, and look forward to bringing together our two organizations."
Michael Dell, Chairman of the VMware Board, said, "Together with Broadcom, VMware will be even better positioned to deliver valuable, innovative solutions to even more of the world's largest enterprises. This is a landmark moment for VMware and provides our shareholders and employees with the opportunity to participate in meaningful upside."
The transaction is expected to add approximately $8.5 billion of pro forma EBITDA from the acquisition within three years post-closing. Pro forma for each company's fiscal year 2021, software revenue is expected to account for approximately 49% of total Broadcom revenue.
Michael Dell and Silver Lake, which own 40.2% and 10% of VMware shares outstanding, respectively, have signed support agreements to vote in favor of the transaction, so long as the VMware Board continues to recommend the proposed transaction with Broadcom. In connection with the transaction, Broadcom obtained commitments from a consortium of banks for $32 billion in new, fully committed debt financing.
The merger agreement provides for a "go-shop" provision under which VMware and its Board of Directors may actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals during a 40-day period following the execution date of the definitive agreement, expiring at 11:59 p.m. Pacific Time on July 5, 2022.
When we see the huge technology shifts , most of the tech companies are raising concern on cyber security. Today, companies and individuals face numerous threats in an increasingly digital world, from misinformation to ransomware. The number and cost of cyber-attacks are on the rise. This comes at an inopportune time, when cyber talent is in short supply and companies are supporting largely remote workforces.
VMware currently has a strong reputation for its cybersecurity capability in safeguarding endpoints, workloads, and containers. Broadcom’s best shot at making this deal work is to let profitable VMware be VMware.
Experts feels that, “Although a chip company buying a cloud software company wouldn’t ordinarily raise US regulatory concerns, the takeover of a leading-edge US cloud software vendor by a Singapore-based company with very strong links to China might prompt regulatory interest given today’s geopolitical backdrop. Still, it’s unlikely to scupper the deal.
The fact is, VMware has really promoted in the last two years their strong network, cloud, and analytics capabilities, all complemented with its security capabilities through the Carbon Black acquisition. Broadcom will have to maintain VMware’s brand and market positioning without diverting from VMware’s previous aspirations and vision,as per Global Data reports.
“Broadcom still possesses, for example, Symantec’s security portfolio under its belt. Therefore, the rebranding of Broadcom’s Software Group as VMware will create software portfolio overlap and potentially create market confusion. Portfolio rationalization will no doubt be on the agenda under the new branding.
What need to see ,“VMware, part of Broadcom can thrive, particularly if they can leverage Broadcom’s infrastructure capabilities and customer base in networks and storage. However, success will depend on how well the businesses integrate across the different business units to make this happen.”
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