Broadcom acquires cloud service provider VMware for $61 billion

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 has just made its plans a reality. But this time, VMware was valued at $61 billion.

VMware was purchased in a cash and stock deal 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 said the VMware acquisition “will advance Broadcom’s strategy to build the world’s leading infrastructure technology company.”

Adding that “By combining Broadcom’s complementary software portfolio with the industry-leading VMware platform, the combined company will provide enterprise customers with an expanded platform of mission-critical infrastructure solutions to accelerate innovation and meet the most complex needs.” in terms of IT infrastructure. »

This acquisition will also increase Broadcom’s earning power. Last year, VMware posted revenue of $11.8 billion, well above Broadcom’s $7.07 billion in revenue from its software group.

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

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

That’s what VMware CEO Raghu Raghuram said of the takeover. “Combining our assets and talented team with Broadcom’s existing enterprise software portfolio, all hosted under the VMware brand, creates a remarkable enterprise software player.

Broadcom has been in business for decades and over that time has become one of the largest semiconductor manufacturers in the world.

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

An analyst at financial services firm Wells Fargo told Reuters: “We believe an acquisition of VMware would be considered to make strategic sense; consistent with Broadcom’s focus on developing a thorough enterprise infrastructure software strategy.

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

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

“A VMware acquisition would roughly triple the size of Broadcom’s software segment, and bring the overall software mix to nearly 50% for the combined company,” said an analyst at private wealth management firm Bernstein.

Image by Bethany Drouin from Pixabay

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