Dusseldorf It could be a billion-dollar deal: The US chip manufacturer Broadcom is in talks to buy the software company VMware, as the “Financial Times” (FT) and Bloomberg both report with reference to people familiar with the matter. Accordingly, the acquisition would offer Broadcom an opportunity to transform itself into a diversified tech company.
VMware is currently valued at around $40 billion on the market. The FT reports that the purchase price could be in excess of $50 billion. Bloomberg assumes a sum of a similar amount. However, the financial news service, citing insiders, emphasizes that it is still unclear whether a deal will be concluded at all. Officials from the two companies declined to comment on Bloomberg and FT requests.
The purchase would be another important step in Broadcom CEO Hock Tan’s strategy. Its goal is to build one of the largest and most diversified companies in the chip industry.
Most recently, the focus was primarily on software: Broadcom bought CA Technologies in 2018 and just a year later Symantec’s corporate security business. In March, Tan told analysts on a conference call following the release of earnings results that Broadcom now has the capacity for a “good-size” acquisition.
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Broadcom recently held talks about acquiring SAS Institute. However, talks about the software company, which is estimated to be worth up to $20 billion, ended last year without a deal.
VMware has already changed hands several times
Broadcom manufactures a wide range of electronics products, ranging from chips in iPhones to industrial equipment. However, data centers have become a major source of growth. The VMware acquisition would give Broadcom an opportunity to better tap into this market.
Founded in 1998, VMware is a pioneering Silicon Valley company that has seen multiple ownership changes. It invented virtualization software: it consolidates applications and workloads onto a small number of servers by using each server for more than one program.
But as more and more work moved to the cloud, VMware struggled to secure a key role. The company eventually formed a close partnership with Amazon, one of the largest providers of cloud storage and services.
In 2004, storage technology giant EMC acquired VMware. That company then sold a portion of its shares three years later as part of VMware’s IPO. In 2016, the company went to Dell. VMware was then spun off from Dell last year.
Michael Dell and private equity firm Silver Lake remain the largest investors in VMware, according to data from Bloomberg.
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