VMware is not commenting on the matter.
This one is interesting, because the three sources we’ve linked to above all say they’ve got the news from “a person familiar with the matter.” All say the deal is nowhere near done, a price has not been discussed, and a transaction is far from certain to happen.
It’s notable that three outlets have been offered the same assessment because leaking news of this sort is a tactic sometimes employed to test market reaction to a deal.
Who could have leaked … and why?
Michael Dell is thought to own over 40 percent of VMware and has literally billions of reasons to oppose a sale – because VMware’s share price has dropped markedly in recent months, from an October 2021 peak of $167 to around $95 at the time of writing. Dell is too shrewd to crystallize that loss with a sale to a predator looking for a bargain. Broadcom’s silicon portfolio could benefit Dell’s hardware businesses, but some kind of cross-ownership arrangement would be a highly unusual arrangement for a component supplier and OEM.
Dell, the company, continues to enjoy friends with benefits status with VMware. Dell, the man, has often said he thinks that relationship is important to Dell, the company. Michael Dell therefore has good reasons to be concerned about an acquisition – and to let the world know it could be coming.
VMware or Broadcom could have let the news out, to test its impact on share prices. News of the talks broke on Sunday afternoon, US time, so impact won’t be felt for another ten or so hours beyond the time at which The Register published this story.
Your correspondent feels that if VMware had a hand in the news emerging, it would be as a defensive measure. VMware resumed standalone operations in November 2021 and is pursuing a multi-cloud strategy under which it hopes to become “the Switzerland of cloud” – a neutral player respected by and acceptable to all. The company knows what it wants to achieve, is in fine financial fettle, and doesn’t obviously need extra resources or muscle to get to market.
VMware will also likely be aware that Broadcom’s recent software acquisitions – CA Technologies was captured for $18.9 billion in 2018 and Symantec slurped for $10.7 billion in 2019 – led to swift and substantial redundancies.
Your correspondent is aware of folks let go by Symantec after its acquisition. In conversation, we suggested that software companies acquired by Broadcom tend to shrink their public profiles quickly thereafter – a notion confirmed by our sources.
That management style could be problematic for VMware, which is currently wooing developers as never before to ensure its Tanzu suite is considered a viable container orchestration rival to the likes of Red Hat’s OpenShift. VMware has also prioritized developing a community among users. Broadcom has shown little sign of interest in such a culture.
But acquiring VMware could make sense for Broadcom, which has made connectivity, security and mission-critical ops its métier. CA Technologies remained a mainframe-centric concern when acquired, so offers limited opportunities for Broadcom to find new customers. VMware would modernize Broadcom’s portfolio and make it more relevant to cloudy buyers.
But Broadcom would not be alone in recognizing that potential, making a bidding war for VMware likely if these talks proceed to an actual offer. ®