The American semiconductor manufacturer, Broadcom, is in negotiations to buy VMware, which specializes in the cloud and professional software, according to information from Bloomberg, published on Monday, May 23. Like many tech companies Broadcom is looking to diversify its business. This acquisition is a new step in the strategy of the company which is ready to spend 40 billion dollars.
Acquisition of software and a cloud computing service
2022 is a year marked by acquisitions in the tech sector, particularly in the field of the cloud. Last March, Intel acquired the start-up Granulate Cloud Solution to face its competitors. Broadcom, American semiconductor giant also wants to turn to the cloud Bloomberg.
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The company is particularly interested in VMware’s cloud computing service. This redemption, which should be made in cash and in shares, would take place in the near future. The chipmaker is valued at $222 billion against $40 billion for VMware. The amount that Broadcom would have to spend is such that the US antitrust authority will be forced to intervene.
VMware represents an asset for diversifying the economic activity of Broadcom, which is beginning to encounter difficulties in supplying certain customers with semiconductors. Indeed, VMware has a wide range of server management software and a strong position in the “hybrid” cloud market.
Many companies today have a mixed cloud infrastructure. That is to say, they mix public cloud services like those of Amazon and Microsoft with private networks, like that of VMware. This acquisition would therefore be a double advantage for Broadcom, which could have its own cloud infrastructures for internal use or to offer this service to other companies.
A strategy to remedy the end of the contract between Apple and Broadcom?
Broadcom’s acquisition strategy to diversify its business began in 2018 with the acquisition of CA Technologies for $19 billion. This is a company that provides professional software for project management, among other things. In 2019 it also appropriates NortonLifeLock, formerly Symantec, a specialist in computer security, for 10.7 billion dollars.
For its part, VMware regained its independence in November 2021, when the computer giant, Dell, withdrew its 81% stake in the capital of the company. However, the founder of Dell, Michael Dell, is still the CEO of VMware, of which he owns 40% of the shares.
Apple’s decision in December 2021 to ramp up semiconductor production in-house, at the expense of its major suppliers, partly motivated Broadcom to expand its business. The apple brand has been one of Broadcom’s biggest customers since 2020, with whom it signed a $15 billion contract.
The company has also been in the sights of the Federal Trade Commission (FTC) of the United States since last summer. She had accused Broadcom of abusing a dominant position and exercising monopolistic behavior in the semiconductor industry. The company has guaranteed that it will no longer put in place a restrictive exclusivity agreement.