Broadcom will acquire VMware in a $ 61 billion enterprise computing deal

Semiconductor giant Broadcom said Thursday it had agreed to buy software company VMware in a $ 61 billion transaction. The deal will provide Broadcom with popular computing tools used by a large portion of corporations and will replace a huge market for enterprise computing technologies.

The chip company will spend the equivalent of $ 138.23 per share in a cash and stock transaction for VMware, the statement said. That’s more than 40 percent of what was rumored about the deal last week.

This combination will make Broadcom a major player in data center technology and cloud computing. According to Dealogic, this will be the second largest purchase in the world this year. (Microsoft’s $ 75 billion offer for Activision Blizzard is the largest.) VMware has more than 500,000 users worldwide and counts all major cloud providers, including Amazon, Microsoft and Google, as partners. This makes VMware a valuable asset to Broadcom CEO Hawke E. For the body.

Mr. Tannie was one of the most lucrative forces in the chip industry, uniting Broadcom at the same time as President Donald J. Trump did not block the $ 117 billion purchase of chip maker Qualcomm proposed by Broadcom in March 2018 under the national security label. Broadcom, which was based in Singapore at the time, moved its headquarters to San Jose, California.

Since then, Mr. Tan has diversified his goals. It bought software company CA Technologies for $ 18.9 billion later in 2018 and Symantec Security Division for $ 10.7 billion in 2019.

With its so-called virtualization software that allows one computer to operate as many machines and essentially makes computing efficiency, VMware will be Broadcom’s flagship asset. VMware reported revenue of $ 12.9 billion in its final fiscal year ending Jan. 28. This was a 9 percent increase over the previous year. This growth rate was much slower than the cloud computing of Amazon, Microsoft and Google. Founded in 1998, before the cloud boom, VMware was dependent on clients who were still running their own data centers.

The deal will be a series of latest major changes for VMware. The company, based in Palo Alto, California, lost its longtime CEO Pat Gelsinger to Intel in January 2021. On May 12, he acquired new CEO Ragu Raguram and lost his chief operating officer, Sanjay Punen. same day. In November, the software maker became independent when it spun off from Dell Technologies.

At the time of Mr. Gelsinger, VMware wanted to get rid of the PC maker that owned most of its stock. Dell acquired the stake in the acquisition of EMC, which was VMware’s former majority owner. VMware envisioned independence as a strategic benefit, enabling it to form new alliances with different technology providers. He also believed that Wall Street would reward him with a higher share price if he parted ways with Dell.

Instead, the company’s shares fell 19 percent from the beginning of the year through Friday, the last trading day before Bloomberg announced talks with Broadcom.

Brad Zelnik, an analyst at Deutsche Bank, said VMware had lost its luster with public investors because it had difficulty competing with the latest cloud technology.

“They, as a business, have struggled to adapt to this transition,” Mr Zelnik said.

The drop in shares has made VMware a more attractive target for Mr. Tan, and if shareholders and regulators approve the deal, VMware’s long-awaited independence will be over.

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