Rumors have swirled for the past week that Broadcom was in talks to purchase VMware. Today, the chip maker confirmed its intentions by announcing that it will acquire VMware for $61 billion in cash and stock.
This Broadcom-VMware tie-up would be among the largest ever in the tech industry. Dell bought EMC for $67 billion back in 2015. Earlier this year, Microsoft made a $68.7 billion deal to purchase gaming giant Activision Blizzard. The deal values VMware at $142.50 per share, representing a 44 percent premium compared to the closing price on May 20th (the last trading day before news of the impending deal was first reported).
Broadcom's chips touch nearly every facet of everyday computing. The company produces chips at the heart of storage and wired networking devices. Broadcom is also a critical player in the wireless industry, making Wi-Fi and Bluetooth chips used in PCs and mobile devices. It is also deeply embedded in industries that you might not think of, like the automotive sector, which has grown increasingly reliant on advanced chips to power infotainment, autonomous driving and battery management systems (in electric vehicles). Broadcom also has a broad enterprise hardware and software portfolio, the latter of which is why the VMware deal is crucial to the company's future growth.
VMware specializes in virtualization and cloud computing, which is an incredibly hot market segment in the enterprise world. VMware offers virtualized software solutions supported across all major desktop operating systems (Windows, Linux, macOS) and enterprise software solutions for server hardware platforms. Dell spun off VMware, which it acquired in 2015 as part of its EMC transaction, just over a year ago.
"Building upon our proven track record of successful M&A, this transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software as we reimagine what we can deliver to customers as a leading infrastructure technology company," said Hock Tan, President and CEO for Broadcom. "We look forward to VMware's talented team joining Broadcom, further cultivating a shared culture of innovation and driving even greater value for our combined stakeholders, including both sets of shareholders."
For his part, VMware CEO Raghu Raghuram added, "Combining our assets and talented team with Broadcom's existing enterprise software portfolio, all housed under the VMware brand, creates a remarkable enterprise software player."
Broadcom expects that the VMware deal with pass regulatory muster (along with approval from shareholders) and should be completed during its fiscal year 2023.