According to various sources, including the New York Times and Bloomberg, Broadcom is negotiating the purchase of VMware, without there being any guarantee that the negotiations will lead to a purchase. In addition, it is not expected that, if reached, the purchase will be announced in the near future. In fact, there has not even been talk of a price for the operation yet, although in the Financial Times they speak of a price that would be around, and even exceed, 50,000 million dollars for the purchase. Nor are the terms of the negotiations that have been carried out so far known.
At the close of trading last Friday, VMware shares closed at a price of $95.71 per share, giving the company a market capitalization value of $40 billion, roughly half that of their highest point, recorded in 2019, and 20% less than they were worth at the beginning of this year.
If both companies reach an agreement, an operation would take place that will help diversify Broadcom’s business, currently known both for its position in the semiconductor sector, and make it go deeper into the business software sector, after that it bought CA Technologies for $18.9 billion in 2018, and Symantec’s enterprise security division for $10.7 billion in 2019.
The purchase of VMware could therefore make sense for Broadcom, which is now focused on developing areas related to connectivity, security and mission-critical operations. In addition, VMware’s portfolio of products and services would modernize Broadcom’s, giving the company greater relevance in all things cloud. But it would be necessary to see how Broadcom would fit the interest in creating a community of business users that VMware does have.
So far, Broadcom has shown no interest in doing so, so VMware’s entry into Broadcom would create a significant culture clash. In addition, Broadcom has so far had no problem laying off employees of the companies it has bought when job redundancies have become apparent.
Currently, the main investor of VMware is Michaell Dell, which has just under 40% of the shares, as a result of VMware’s spin-off from Dell Technologies last year. The venture capital entity Silver Lakewhich is also an investor in Broadcom, is the second largest shareholder of VMwareand currently owns around 10% of its shares.
In the negotiations for this operation, it is also certain that the former parent company of VMware, Dell, still enjoys a certain priority in everything related to VMware, and Michael Dell has stated on numerous occasions that he believes that the relationship that the company has with VMware is beneficial to Dell.