Broadcom will acquire VMware in major Enterprise Computing agreement

Broadcom, the semiconductor giant, said Thursday it agreed to buy software company VMware in a $ 61 billion transaction. The deal would provide Broadcom with popular computing tools used by a wide range of companies and reshuffle the vast enterprise information technology market.

The chip company will spend the equivalent of $ 138.23 per share for VMware in the cash and stock deal, said in a statement. That’s more than 40 percent more than before rumors of a deal started circulating last week.

The combination would make Broadcom a major player in data center technology and cloud computing. It would also be the second largest acquisition in the world proposed this year, according to Dealogic data. (Microsoft’s $ 75 billion offering for Activision Blizzard is the largest.) VMware has more than 500,000 customers worldwide and partners with all major cloud service providers, including Amazon, Microsoft and Google. This makes VMware a valuable resource for Broadcom CEO Hock E. Tan.

Mr. Tan had been one of the most bought forces in the chip industry, bringing Broadcom together one deal at a time, until President Donald J. Trump blocked Broadcom’s proposed $ 117 billion. acquisition of chip maker Qualcomm in March 2018 for national security reasons. Broadcom, which was based in Singapore at the time, moved its headquarters to San Jose, California.

Since then, Mr. Tan has diversified his goals. He bought the software company CA Technologies for $ 18.9 billion later in 2018 and a security division of Symantec for $ 10.7 billion in 2019.

With so-called virtualization software, which allows one computer to act like many machines and essentially makes processing more efficient, VMware would be Broadcom’s flagship resource. VMware posted revenue of $ 12.9 billion in its last fiscal year, which ended January 28. This is a 9% increase over the previous year. That growth rate has been much slower than the cloud computing arms of Amazon, Microsoft, and Google. Founded in 1998, before the cloud boom, VMware depended on customers who still manage their own data centers.

A deal would be the latest in a series of 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, it acquired a new CEO, Raghu Raghuram, and lost a chief operating officer, Sanjay Poonen, on the same day. In November, the software maker went independent when it was spun off from Dell Technologies.

Under Mr. Gelsinger, VMware was eager to extricate itself from the personal computer maker who owned the majority of its shares. Dell obtained the stake through the acquisition of EMC, which was the previous majority owner of VMware. VMware viewed independence as a strategic advantage, enabling it to forge new alliances with a variety of technology vendors. She also believed that Wall Street would reward her with a higher share price if she separated from Dell.

Instead, the company’s shares fell 19% year-to-date through Friday, the last trading day earlier Bloomberg reported on the negotiations with Broadcom.

Brad Zelnick, an analyst at Deutsche Bank, said VMware lost its luster with public investors because it struggled to compete with new cloud technology.

“They have been challenged as a company to adapt to this transition,” Zelnick said.

That stock slump has made VMware a more attractive target for Mr. Tan, and if shareholders and regulators approve the deal, VMware’s much-desired independence will already end.

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