In brief: Like many other agencies around the world, the European Commission has started to take a closer look at the proposed acquisition of VMware by Broadcom. The EU wants to understand if the deal would have a negative impact on competition, which seems a real issue after the initial investigation.
Broadcom wants to acquire VMware for the ginormous sum of $61 billion, a transaction that, if finalized, could be one of the biggest acquisitions ever for the technology market. The two companies plan to merge in Broadcom’s fiscal year 2023, which started in November 2022, but there are still many hurdles to overcome before finally signing the deal.
Another massive obstacle to Broadcom’s seemingly insatiable hunger for lesser corporations is coming from the European Union, with the European Commission announcing an in-depth investigation to assess if the acquisition would hinder competition in the EU server market.
The Commission is said to be particularly concerned that the transaction “would allow Broadcom to restrict competition in the market for certain hardware components which interoperate with VMware’s software.” In the server market, interoperability is a paramount requirement, and the Commission fears that a stronger and bigger Broadcom could promote higher prices, lower quality and less innovation for business customers and (“ultimately”) consumers.
The European Commission says that Broadcom is a hardware company offering Network Interface Cards (NIC), Fiber Channel Host-Bus Adapters (FC HBAs) and storage adapters, even though the San Jose-based organization has become something much different from the original chip designer born as a division of Hewlett-Packard. Today, Broadcom is voraciously acquiring other technology companies, and VMware would be just the latest (costly) meal on the table.
According to Margrethe Vestager, Executive Vice-President of the EU Commission in charge of competition policy, the acquisition of VMware, a “key server virtualization software provider,” is a matter of concern for Brussels. After the merger, Vestager said, Broadcom could “prevent its hardware rivals to interoperate with VMware’s server virtualization software, bundling VMware products with its own mainframe and security offers, and hindering the development of SmartNICs by other providers like the ones involved in VMware’s Monterey project (Nvidia, Intel, Amd).”
For these reasons, the European Commission will thoroughly investigate the proposed Broadcom-VMware deal. The transaction was notified to the Commission on 15 November 2022, and now the Commission has 90 working days (until 11 May 2023) to take a decision. Broadcom said that the company is working with authorities around the world to answer any concerns, and it is looking forward to continuing its “constructive work with the European Commission as part of their thorough review process.” The transaction will close by the end of fiscal year 2023, Broadcom said.