Mega-deal alert… Yesterday, chipmaker Broadcom confirmed plans to buy software developer VMware for $61B — what would be the third-largest tech deal in history and one of the biggest overall deals of the year. Refresher: VMware was one of the pioneers of early cloud-computing tech for big biz (aka: the $672B enterprise market), and was spun off last year by its former owner, Dell. What’s on the table:
- Broadcom expands its mostly chip-based portfolio by tripling its software biz, which the company has been growing through smaller acquisitions. VMware also gives B’com a foothold in the boring-sounding but lucrative world of corporate data centers.
- VMware partners with all the big cloud providers, like Google, Microsoft, and Amazon, meaning Broadcom becomes a more integral part of the “plumbing” of the modern internet.
Broadcom’s bag of chips… has a lot of variety. From WiFi and Bluetooth to powering appliances, Broadcom’s semiconductors play a crucial component in connecting most of your everyday gadgets. But in the past year the global chip shortage has forced the company to limit how many orders it can fill, sacrificing sales. Enterprise software is an attractive way for B’com to diversify because it’s a strong market filled with deep-pocketed customers that provide recurring revenue streams.
Nothing’s done till it’s done… Broadcom tried to buy rival chipmaker Qualcomm in 2018 but was blocked by the Trump administration on antitrust and national-security grounds. Even though VMware isn’t a direct rival, the Biden administration has been skeptical of big corporate tie-ups: it recently sued to block a different chip merger between Nvidia and Arm, which led to the deal’s collapse.