Summary Bullets:
• Approved in the EU: The European Commission has granted approval for the acquisition of VMware by Broadcom.
• Caution is Warranted: Enterprises should be cautious about commitments to VMware until at least a year after the acquisition completes.
On July 12, 2023 the European Commission (EC) approved Broadcom’s acquisition of VMware for the tune of around $61 billion. The main concern on the part of the EC was that Broadcom’s ownership of VMware and its nearly omnipresent server virtualization software could create interoperability issues in the Fibre Channel host bus adapter (FC HBA) and Ethernet network interface card (NIC) markets. The deal gives assurances to Broadcom’s sole rival in the FC HBA market, Marvell Technology, as well as access to interoperability tools it needs.
That is all well and good – Fibre Channel is one of the most common ways to connect block storage to compute systems. However, Fibre Channel is essentially a legacy technology. While still widespread, it constitutes an entirely separate network and set of hardware for data center operators to manage. Fibre Channel’s long-time advantages in speed and reliability have been removed or minimized by advances in Ethernet. To give an example of how much attention Fibre Channel gets, the unified communication announcement is the first time Fiber Channel has hit anybody’s front page in years.
Plus, this deal excludes Ethernet NICs. Not only does Broadcom supply Ethernet NIC chipsets, it also is one of the largest suppliers of Ethernet switching and routing chips. Nothing has been said about that potential issue. Broadcom still needs approval from American regulators to consummate the deal, and GlobalData expects that to happen with few or no additional requirements.
This deal is still problematic for enterprise customers. Broadcom has stridently claimed that VMware will be the crown jewel of its software division. However, with Broadcom’s past software acquisitions of CA Technologies and Symantec, there was nothing but price increases, slashing of R&D budgets, and layoffs. A company sale often brings changes to executives, but the sheer number of long-time leaders at VMware departing the company before the Broadcom sale doesn’t bode well. The rise of much cheaper and web-friendly container architectures also represents an existential threat to VMware itself, despite the company adding support for containers to its profile.
Enterprises should be concerned and careful about VMware for at least a year after the acquisition is finalized. The level of uncertainty around VMware at this point is simply too high to ignore.