The move by chip manufacturer Broadcom to acquire VMware — the business that famously popularised virtualisation and led to the rise of cloud computing — in May 2022, caught the market by surprise for two reasons.

The price it paid, at $61bn, puts it among the top-tier tech sector purchases ever. VMware was previously owned by Dell, which it acquired as part of Dell’s $67bn acquisition of EMC before spinning out the multi-cloud services provider a few months ago. The spin-out netted Dell about $9bn according to TechCrunch. 

The second reason is that the deal was so unexpected. While Broadcom was clearly building a software portfolio after it acquired CA (formerly Computer Associates) and cybersecurity firm Symantec, VMware simply wasn’t in the frame.

Surprise rapidly turned to consternation among two of the key VMware stakeholder groups: its customers and its reseller channel. Both the CA and Symantec takeovers were troubled marriages. Huge price rises, poor service levels, and stalled development marked the transitions. 

That last point would be particularly problematic for customers of VMware, who often have years and even decades worth of investment in the software. So the potential for innovation to slow or cease is a serious concern. Indeed, it’s been flagged as a key issue by the executive director of VMware’s 150,000-strong user group as the matter most exercising the minds of his members.

Its partners, meanwhile, want to understand how VMware’s new owner will divvy up the prospect pie — Broadcom typically wants to focus on a smaller number of very large customers, and leave the smaller ones to wither. They also worry about how much love the new owners will give the partner channel, and there are concerns about the impact if key personnel leave due to ongoing uncertainty.

However, while the IT industry has plenty of examples of takeovers that didn’t take — SAP’s purchase of Qualtrics is a good one — there are sound reasons why the experience of VMware’s customers and partners may be a little smoother.

With its purchases of CA and Symantec, Broadcom already signalled its intent to build a software portfolio, and its large cheque for VMware solidifies that intent. But while the earlier acquisitions involved companies at a very late stage of their life cycle, VMware is in a different category.

According to VMware CEO Raghu Raghuram, “They were very, very mature companies, with very little prospect of growth in the category that revenue was mostly focused on.”

In contrast, VMware — under which the other software businesses will be housed — is a comparative spring chicken and is positioned to take advantage of the stronger-for-longer shift to the cloud. At the VMware Explore conference earlier this month, Raghuram made the point that, for all the sizzle around cloud, it still only accounts for about 10 percent of technology spending — so there’s a huge upside yet to be realised.

VMware has five main areas of focus, all of which place the business in a strong position to exploit long-term business and societal changes and growth drivers. 

• It provides an app platform to build and operate cloud-native apps.

• It offers cloud management to automate and optimise apps and clouds.

• Its cloud and edge computing infrastructure solutions help companies run enterprise apps anywhere.

• Its security and networking approach helps companies connect and secure apps and clouds. (There was a scarcity of security announcement at this year’s user conference, however Raghuram told NRP that reflects the current product cycle rather than former CEO Pat Gelsinger’s very public commitment to expanding cybersecurity offerings.)

• Finally, VMware’s Workspace offering is designed to enable access to any app on any device securely.

In addition to cloud computing, VMware helps companies manage the kind of hybrid working conditions employees demand. Its investment in businesses such as Carbon Black in 2019 — plus Octarine and Lastline both in 2020 — position it strongly in the cybersecurity space. And when Symantec is added in, it’s starting to build some critical mass. Its technology is key to helping companies run those energy-hungry data centers much more efficiently — giving it a strong ESG pitch as well.

Speaking to analysts in the company’s recent earnings call, Broadcom CEO Hock Tan said the company is now talking with business regulators in “a couple of jurisdictions” and is making “good progress” according to CRN.com.

The exact timing of when the deal will close, however, remains loose. Tan is sticking to the line that completion will occur in its next fiscal year which begins this November.