Broadcom’s $61 Billion VMware Acquisition Expands Business Into Cloud Computing

Source: Broadcom

The recent rumors of chipmaker Broadcom ironing out a deal to acquire cloud service provider, VMware sent the tech world speculating on how that deal might look like. Well, now we know—and it’s massive at $61 billion. The cloud computing world just became more exciting.

As we previously reported, Broadcom’s purchase of VMware marks a growing interest in cloud computing. The cloud computing market is showing no signs of saturation as the world of work and business increasingly rely on online processes, especially SaaS products. Global end-user spending on SaaS solutions is up and is estimated to further increase to $494.7 billion in 2022 from $410.9 billion in 2021. By the end of 2023, SaaS spending is estimated to reach $600 billion.

Moreover, a report by Cisco estimates that 75% of the workloads and workstations for cloud computing will be in the form of a SaaS model by the end of 2022. With these numbers in mind, it’s easy to see the incentives for Broadcom to get into the cloud computing business. Buying VMware is an excellent way for the semiconductor company to diversify from its core business and benefit from larger margins present in enterprise software.

VMware is known to be a pioneer in virtualization technology. It’s also included among the top providers of multi-cloud and hybrid cloud services. Based on cloud computing trends, organizations are increasing their adoption of hybrid cloud environments. Enterprises use VMware products to efficiently run and manage their on-premise and cloud-based servers.

However, Broadcom’s acquisition will not only give it access to the virtualization and multi-cloud capabilities of VMware. It will also include other major tech products VMware is offering such as containerization, modern security tools for cloud-native workloads, and cloud and edge infrastructure.

More Details 0n the Deal

Broadcom plans to buy VMware via a combination of cash and stocks transaction. As experts in the industry noted, if the deal goes through, it would be one of the largest in the history of tech acquisitions. On the record, Dell bought EMC for $67 billion in 2016, while Microsoft is in talks to acquire video game holding company, Activision Blizzard, pegged at $69 billion.

Though the VMware deal is huge, this is not the first time Broadcom has made such immense acquisition offerings. CEO, Hock Tan, had said that the company has the resources to do a good-sized acquisition. In fact, it was in the works to purchase Qualcomm for $117 billion in 2018 but the deal didn’t push through after then-President Donald Trump cited national security concerns over the planned buy out. Qualcomm is an American semiconductor company with products and patents related to critical wireless technology like 5G and WCDMA mobile communications standards.

Broadcom currently has two companies operating in the software industry, namely, CA technologies and Symantec. The former—an IT management software and solutions company—was acquired in 2018 for $18.9 billion, while the latter—cybersecurity company—was bought for $10.7 billion in 2019.

VMware CEO Raghu Raghuram spoke with confidence about the direction and merger of the two companies. “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,” said Raghuram.