Broadcom CEO Hock Tan took to the stage at this week’s VMware Explore Barcelona event in his latest attempt to sooth potential concerns from VMware customers that his company’s pending acquisition will not follow Broadcom’s historical model.
Tan told attendees during a brief keynote address that he has learned a lot from talking to VMware customers and partners over the past 18 months and stated three “commitments we will make to you, our customers.”
The first is that semiconductor, infrastructure and network giant will “accelerate the pace of innovation” through increased research and development investments. Tan wrote in a blog post earlier this year that Broadcom planned to invest an incremental $2 billion per year in VMware, with half of that investment focused on R&D.
VMware CEO Raghu Raghuram pointed to this commitment during a question-and-answer session with analysts and reporters following his opening keynote speech at the vendor’s San Francisco-based Explore event in August.
“I would refer you to Broadcom and their stated plans, and what Hock Tan has written in public blogs, and you heard a little bit in the video as well,” Raghuram added. “They intend to continue to invest and operate in VMware as a continuation of our current business, reinforcing the multicloud strategy and building upon the multicloud strategy as a singular division within Broadcom, so that’s what they’ve announced.”
Tan this week also said Broadcom “plans to invest much more in the VMware ecosystem, with our partners, the value-added resellers, the distributors, OEMs, the managed service providers and, of course, global system integrators in order to make our products more available and much easier to deploy and consume.”
That commitment echoed Tan’s blog post where he tied the “other half” of the $2 billion per-year investment commitment to Broadcom to “helping to accelerate the deployment of VMware solutions through VMware and partner professional services.”
The big Broadcom questionTan’s final commitment was the briefest and perhaps the one most on everyone’s mind.
“We will make ourselves and our products easier to deal with,” Tan said, before departing the stage.
Critics of Broadcom’s acquisition of VMware have repeatedly cited the vendor’s historical precedence in how it treated an acquired entity, and more importantly that acquired entity’s customers, as the most worrisome part of the deal. The most dire being its purchase of CA Technologies in late 2018, and Symantec in 2019.
“I think so much of the conversation around the Broadcom acquisition really revolves around how those businesses are treated after the acquisition gets closed,” Alex Demeule, an analyst at Technology Business Research, told SDxCentral before this year’s VMware Explore San Francisco event. He added that VMware has a “sticky installed base in the virtualization market. I think that’s really what Broadcom is after. Broadcom to me looks like a private-equity company as much as a technology company. They are just really good at buying sticky installed bases and generating free cash flow off of them.”
Demeule noted that VMware’s most likely source of continuing to generate free cash flow will be in its ability in taking advantage of its Tanzu cloud-native network platform. Outside of that focus, Demeule said it’s likely Broadcom could look to trim under-performing operations, specifically citing VMware’s Carbon Black cloud security business.
“I think trimming makes a lot of sense for Broadcom and making divestitures in terms of how can they improve profitability,” Demeule said.
Sumit Dhawan, president of VMware, attempted to tackle that potential challenge by stating during VMware had managed to maintain its operational focus through past ownership structures.
“Broadcom’s operating model is to when they acquire businesses, they let them operate independently,” Dhawan said. “Our operations in terms of the strategy that we laid out and the portfolio we deliver and how we serve customers, that will stay on as a mission of VMware regardless of the ownership structure. … We’ve always had a focus on our strategy mission, operated independently and delivered on it and under EMC and Dell, it’s going to be the same with Broadcom.”
Dhawan also touted VMware’s need to continue partnering with the broader cloud ecosystem in order to grow its business.
“Virtualization is an abstraction and subtraction of hardware, so you can do abstraction of one type of hardware. By definition, there is no existence of VMware if you don’t have a broad hardware ecosystem,” Dhawan said.
The clock continues to tickTan’s VMware Explore Barcelona appearance came just weeks after Broadcom was forced to postpone the long-touted deadline for the deal to close. It was pushed from the original October 31, which was the end of Broadcom’s third-fiscal quarter, to “prior to the expiration of their merger agreement,” which is November 26.
Published reports tied the postponement to the Chinese government holding up the deal due to ongoing geopolitical tension with the United States. That tension is reportedly tied to the U.S. government’s tightening China’s access to semiconductor and network technology.
Mauricio Sanchez, senior director of enterprise security and networking research at Dell’Oro Group, told SDxCentral that the delay is not ideal for all involved, but not yet a significant concern.
“The longer this goes on the more painful for the customers and shareholders in the companies,” Sanchez said, adding that the potential holdup tied to China’s approval does add to the uncertainty. “They don’t tend to be very transparent about their timelines, so, on the one hand, it’s good that they’ve gotten this far, but, on the other, it’s unfortunate that they’re stuck behind an approval.”
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