VMware, the cloud computing software outfit led by Intel’s current CEO Pat Gelsinger till a few years ago, is the next acquisition target of Broadcom, known as a highly acquisitive company in the semiconductor industry. At the outset, it seems another bid to align Broadcom to the software side of the rapidly growing data center business.
It’s Broadcom’s third major acquisition of a software company; it bought CA Technologies for $18.9 billion in 2018 and the security division of Symantec for $10.7 billion in 2019. Last year, the chipmaker also came close to buying analytics software developer SAS Institute. The VMware deal marks Broadcom’s next foray into enterprise software.
VMware, which spun out of Dell Technologies in November 2021, develops virtualization software to make computing more efficient; it offers a range of software products for the hybrid cloud market. On the other hand, Broadcom is focusing its silicon offerings on connectivity, security, and mission-critical operations. And that sits well in creating synergy with VMware’s multi-cloud strategy.
What’s also common between these two companies is that they are both beneficiaries of the exploding data center market. Currently, Broadcom is a $222 billion company, while VMware has nearly $40 billion market valuation. However, according to industry reports, the deal can be worth $50 billion, potentially transforming Broadcom into a more diversified tech giant.
It’s still unclear how Broadcom actually plans to create a synergy between its semiconductor business and VMware’s software offerings. Moreover, the terms of the deal are still unknown, and according to some industry sources, negotiations between the two companies are ongoing, and a deal is not imminent.
According to some industry observers, that may trigger a bidding war in the coming days. Furthermore, it can potentially boost VMware’s stock price, which has taken a dip lately.
Majeed Ahmad, editor-in-chief of EDN and Planet Analog, has covered the electronics design industry for more than two decades.