Broadcom boss talks VMware acquisition

Hock Tan addresses Broadcom’s multi-cloud strategy, cloud-native apps and VMware pricing in a new blog post

Broadcom announced plans to acquire VMware in May, in a cash and stock transaction valued at $61 billion. Ever since then, questions have abounded in tech circles about Broadcom’s intentions. To help put concerns to rest, Broadcom’s president and CEO Hock Tan recently offered his thoughts in a recent blog post entitled “What a combined Broadcom and VMware can deliver to our customers.”

Broadcom is best known for its semiconductors, but the company already has an enterprise software group, mostly accreted through past acquisitions, that brought in more than $7 billion in revenue in 2021. VMware’s annual revenue — $11.8 billion for 2021 — dwarfs that, however. So, it’s perhaps little surprise that Broadcom plans to rename its software group VMware with the conclusion of the acquisition, which it expects to complete by the end of next year.

“Three topics are top of mind for customers as it relates to the VMware-Broadcom transaction: multi-cloud, cloud-native apps and pricing,” said Tan.

VMware has made multi-cloud app deployment and management a key focus in recently years. At this year’s VMware Explore event in San Francisco, CEO Raghu Raghuram talked about moving from “cloud chaos” to “cloud smart” using VMware services and technologies to better wrangle some complexities and intricacies of multi-cloud deployments.

Customers are already navigating multi-cloud mindsets and so is Broadcom, Tan said.

“For some time, Broadcom has recognized that the future of enterprise IT is multi-cloud — the ability to distribute applications and services across a combination of clouds. It’s one of the many reasons Broadcom solutions complement what VMware does in the multi-cloud space across private, public, edge and sovereign clouds today,” said Tan.

Tan turned his attention to Tanzu, VMware’s suite of products designed to help users manage containerized cloud apps using Kubernetes, across public and private clouds and in on-premises environments. 

“I see Tanzu as a strategic part of the VMware software portfolio and it will remain that way as we move forward within Broadcom. VMware Tanzu customers are running some of the most mission critical applications in the world. As customers think about future investments in cloud native applications and the modern application development space, they should feel confident in Broadcom’s commitment going forward,” said Tan.

But by doing so, Broadcom will irrevocably change its revenue stream. With VMware in Broadcom’s tent, 49% of the company’s combined annual revenue will come from enterprise software sales.

When it comes to pricing, Tan said, “The Broadcom business case for this transaction is premised on focusing on the business model, increasing R&D, and executing so that customers see the value of the full portfolio of innovative product offerings — not on increasing prices.”

Broadcom will focus on growing VMware’s enterprise business, he said, “deepening and expanding the footprint instead of potentially raising prices.”

After the transaction closes, Tan said, Broadcom will focus on integrating VMware and its employees. “VMware is an innovation success story — but the company’s story is far from finished and we’re excited to help write the next chapters,” said Tan.