Broadcom to spin VMware takeover as creating 'more competition' in cloud

Chip giant flutters eyelashes at Europe in hope of early acqusition

Broadcom hopes to convince European antitrust regulators to greenlight its $61 billion takeover of VMware early – by claiming it will boost competition with public cloud giants Microsoft, Amazon, and Google.

Citing sources familiar with the matter, Reuters reported Sunday that Broadcom wants to shave four months off its acquisition timeline.

That is, of course, if it can convince regulators in Europe a second phase of investigation – a deeper, lengthy dive into the industry – is unwarranted.

And Broadcom hopes to do that by demonstrating that taking over VMware will somehow increase user choice, seemingly by pointing out that global cloud giants already offer similar virtualization and IT management technologies, and that's where Broadcom will compete. By Broadcom's logic, what's therefore the harm in owning and promoting VMware?

"This [deal] is creating more competition in the cloud market where there are very big players now. This doesn't have to go to phase two at all," the unnamed sources claim. "For the commission to go to phase two, there has to be a real competition problem – horizontal, vertical, foreclosure risk – and I think we can show those risks don't really exist in this case.”

Broadcom announced its bid to acquire cloud virtualization giant VMware in late May. The deal has been met with both cautious optimism and concern.

VMware executives have, unsurprisingly, projected a positive attitude toward the merger. Speaking with The Register at VMware Explore in August, CEO Raghu Raghuram acknowledged customer concerns, but said Broadcom isn’t using the same playbook it used with Symantec and CA.

“They were very, very mature companies with little prospect of growth in the categories they were in, and the revenue was mostly focused on 400 or so customers,” he said at the time.

However, that hasn’t stopped midsize and smaller enterprises from seeking alternatives virtualization stacks as to hedge their bets against “extraordinary price increases and challenges with support,” a Gartner study revealed.

The survey from the analyst giant's Global Market Intelligence in June found that enterprise perception surrounding the deal remains largely negative. It found the majority of VMware customers — 56 percent — of customers harbored negative feelings toward the takeover, with licensing costs chief among their concerns.

VMware is far from the only datacenter hypervisor on the market. There are plenty of open source and proprietary virtualization stacks available on the market today from the likes of Red Hat, Microsoft, Proxmox VE, and XCP-ng to name just a handful. However, few are as prolific as VMware’s ESXi and vSphere, which dominate the datacenter virtualization market.

Just as the results foretell, customers have reasons for concern. Broadcom’s track record and stated strategy indicates that following the acquisition the company will abandon smaller customers and refocus its efforts on larger and less nimble customers.

There is no guarantee that Broadcom, which has yet to seek EU approval, will avoid rigorous review by regulators in the region. The Financial Times previously reported that monopoly watchdog were gearing up for a “lengthy” antitrust investigation. With that said, the public cloud providers, which control roughly three-quarters of customer spending in the European market, have fallen under intense scrutiny from regulators in recent years.

It remains to be seen whether Broadcom can convince anyone buying VMware will actually result in greater choice for customers. ®