Broadcom Inc. is in a negotiation to acquire cloud-computing company VMware Inc. which is going to be a blockbuster tech deal. This is according to the people familiar with the matter. This would make the chipmaker enter into a highly specialized area of software.
The negotiations are still in place and there’s no guarantee they will lead to a purchase, said the people, who asked not to be identified as the matter is not public yet. VMware is currently valued in the market at $40 billion.
Broadcom Chief Executive Officer Hock Tan has built one of the largest and most diversified companies in the entire chip industry. It is clear that the software industry has been a key focus in recent years, with Broadcom buying CA Technologies in 2018 and Symantec Corp.’s enterprise security business in 2019.
In March, it is notable that Tan had told analysts on a post-earnings call that Broadcom had the capacity for a “good size” acquisition.
“Investors have been increasingly focused on Broadcom’s appetite for another strategic or platform enterprise software acquisition — especially given the recent compression in software valuation, “ wrote Wells Fargo analysts after the news report from Bloomberg.
“An acquisition of VMware would be considered as making strategic sense. It is consistent with Broadcom’s focus on building a deepening enterprise infrastructure software strategy.”
Broadcom faced antitrust scrutiny over its contracts wanting equipment makers to use its chips in set-top boxes and broadband internet devices. The company has settled with the US Federal Trade Commission last year and with European competition authorities in 2020.
Broadcom is known for manufacturing electronics, with its products ranging everything from the iPhone to industrial equipment. But data centers are becoming a critical source of growth, and bulking up on software gives the company more ways to target that market.
Broadcom was previously in a negotiation to acquire SAS Institute Inc., a closely held software company that was valued at $15 billion to $20 billion. But the deal was not a success.
Follow and connect with us on Facebook, LinkedIn & Twitter
