There is fire when there is smoke. There were rumors of an interest in VMware by Broadcom this past weekend. The fire was burning so hot that it was announced today that it was being acquired by Broadcom.
The deal is a combination of cash and stock.
The core virtualization that the company was built on is not the only thing that the company gets with VMware. Along the way, it acquired other pieces like Heptio for containerization, which helps provide support services for companies transitioning to modern technology. Carbon Black was acquired at the same time as it bought pivotal.
That touches upon a lot of technology, but it raises the question of where it all fits with the company, which has spent a fair amount of money in recent years buying up a couple of key software pieces.
It isn't an obvious fit with the other software pieces in the portfolio.
It spent over $18 billion in 2018 to buy legacy enterprise software company CA Technologies and another $11 billion a year later for Symantec’s legacy security business. Those are very different animals from VMware, which is still a viable company and not some dinosaur with a portfolio of licensing deals on the books that a company like Broadcom can take advantage of.
Dell is spinning out VMware in a deal expected to generate over $9B for the company
When Dell spun it out last year, we speculated who might buy it, one of which was Intel, whose CEO used to run it. There was a notion that a chip maker would be interested in VMware.
The deal will create a remarkable enterprise software player, according to the CEO of the company.
Even if CA is more of a legacy play, Holger Muller sees a synergy between the three software pieces. If it has the good sense to leave it alone, VMware has the potential to give Broadcom some financial stability.
The chip market has a roller coaster of ups and downs, butVMware brings a more steady trajectory. It is also more profitable. I expect Dell to leave VMware in peace as long as they deliver, he said.
The federation of companies under the EMC umbrella allowed it to operate independently with its own board of directors and own stock. In 2015, Dell bought the company for $67 billion, which was less than the price of VMware alone.
Michael Dell personally owns more than 40% of outstanding Dell stock, so he will do well here. He and Silver Lake, who own 10% of the stock, both gave their approval to the deal.
According to data from the research firm, VMware held the top position in the global market for virtualization infrastructure software in the year 2021, with a market share of 72% and revenue of $5.9 billion.
The company has 45 days to find a better deal, but that seems unlikely at this price. The deal will still be subject to regulatory oversight, which has not been a rubber stamp recently, especially with large numbers like this.
In the past, the company has run into regulatory road blocks when it tried to buy another company. Maybe regulators will be more tolerant of a software deal.
VMware acquires Carbon Black for $2.1B and Pivotal for $2.7 billion
All Rights Reserved © 2024
