Broadcom acquires cloud service provider VMware for $61 billion 

<strong>Broadcom acquires cloud service provider VMware for $61 billion </strong>
Finance

Earlier this week, a report on Reuters announced Broadcom Inc‘s plans to acquire multi-cloud service provider VMware Inc for $60 billion. 

The global chipmaker just made good on its plans. But this time, VMware was valued at $61 billion.  

VMware was bought in a cash-and-stock transaction to help Broadcom venture into the enterprise software space.

The global technology leader will assume $8 billion of VMware net debt, and $142.50 per share will be paid to VMware shareholders.

In a report released by Broadcom, the company stated that acquiring VMware will “advance Broadcom’s strategy to build the world’s leading infrastructure technology company.”

Adding that, “By bringing together the complementary Broadcom Software portfolio with the leading VMware platform, the combined company will provide enterprise customers an expanded platform of critical infrastructure solutions to accelerate innovation and address the most complex information technology infrastructure needs.”

This acquisition will also expand Broadcom’s earning capacity. Last year VMware recorded $11.8 billion in revenue, which is a lot more than Broadcom’s $7.07 billion revenue from its software group.

Broadcom’s software group will be renamed VMware. This rebranded group will be an “expanded VMware portfolio” that will include Broadcom’s existing infrastructure.

This buyout comes second to Microsoft’s $68.7 billion buyouts in January. The global technology corporation acquired video game company, Activision Blizzard, in what has been recorded as the biggest buyout of the year so far.

This is what VMware’s CEO, Raghu Raghuram said about the buyout. “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 has been in business for decades, and in that time, they have become one of the biggest semiconductor manufacturers in the world. 

The company currently has a market cap value of $217.05 billion, and with VMware as its latest acquisition, enterprise software will account for 49% of its annual revenue.

An analyst from financial services company Wells Fargo, told Reuters, “We believe an acquisition of VMware would be considered as making strategic sense; consistent with Broadcom’s focus on building out a deepening enterprise infrastructure software strategy.”

VMware was founded in 1990, and it was one of the major pioneers of virtualization technology. In 2021, the company was spun off by Dell Technologies. 

The founder of Dell Technologies, Michael Dell, is still a shareholder with 40% of the company.

“A VMware acquisition would just about triple the size of Broadcom’s software segment, as well as bring the overall software mix close to 50% for the combined company,” says an analyst from private wealth management firm Bernstein

Image by Bethany Drouin from Pixabay

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