Broadcom in advanced talks to buy VMware
Broadcom Inc. is in advanced talks to buy VMware Inc., according to people familiar with the matter, paving the way for what would be one of the biggest deals of the year.
The tech companies are discussing a cash and stock deal that could happen soon, assuming the talks don’t collapse, the people said. VMware has a market value of $40 billion, while Broadcom’s is around $222 billion.
Discussions over the deal, which have accelerated in recent days, come about six months after computing pioneer Dell Technologies Inc. sold its 81% stake in VMware.
Bloomberg reported earlier on the talks.
VMware has a strong position in the “hybrid” cloud market, where large enterprises mix public cloud services like those from Amazon.com Inc. and Microsoft Corp. with their own private networks.
Broadcom, a semiconductor powerhouse built largely through acquisitions, is seeking a deal to boost its presence in the enterprise software market. Last year, he nearly bought software company SAS Institute Inc., before the SAS founders changed their minds. Its first big foray into software was its acquisition of CA Technologies for around $19 billion in 2018.
Demand for cloud computing, which allows customers to rent computing power rather than investing in their own, has exploded in recent years. Startups and other businesses that couldn’t support in-house IT departments were early adopters of the cloud, but now businesses in nearly every industry rely on cloud services.
Dell completed the spin-off of its VMware stake in November. VMware shareholders, including Dell, received a cash dividend of $11.5 billion. Dell used the funds to pay down debt and said the deal positions it to expand into new markets. Michael Dell, the company’s founder, president and CEO, remained VMware’s president.
VMware is roughly a year into a new regime after company veteran Raghu Raghuram took over following the departure of CEO Pat Gelsinger, who left to lead Intel Corp.
VMware is expected to report results on Thursday, while Broadcom is expected to report results next week.
A market downturn that drove stock prices down made it more difficult to strike deals and fund them. Transaction volume is down about 25% so far this year compared to last year, according to Dealogic. The approximately $75 billion acquisition by Microsoft Corp. video game heavyweight Activision Blizzard Inc. is the biggest of 2022 so far.