Europe moves to derail Broadcom's VMware takeover

Strangling competition won't fly here, says Brussels

The European Commission has filed a statement of objections regarding Broadcom's proposed purchase of VMware, which the EC said may be harmful to competition.

In that statement, Brussels said it was concerned that following the merger Broadcom could screw over suppliers of NICs, fiber channel host bus adapters, and network storage adapters that interoperate with VMware's hypervisor stack, "by delaying or degrading" those vendors' access to that virtualization software.

The EC argued Broadcom is the leading supplier of electronic components for that networking hardware, and that the market for such is already very concentrated on a small number of manufacturers. In Europe's eyes, Broadcom could gobble up VMware and then make changes to prevent everyone else from using the virtualization outfit's software with anything but Broadcom's hardware. That would force organizations relying on VMware to buy Broadcom products, to the detriment of rivals offering competing equipment.

"If the competitors of Broadcom are hampered in their ability to compete in these markets, this could in turn lead to higher prices, lower quality, and less innovation for business customers, and ultimately consumers," the EC asserted. 

Chip giant Broadcom announced its intention to acquire enterprise software house VMware for $61 billion (£48.8 billion) in May of last year, leading to both European and British scrutiny of the deal. Late last month, the UK's Competition and Markets Authority wrapped up a preliminary investigation into the takeover, finding that the deal could be harmful to competition for the same reasons cited by the European Commission's announcement. The US Federal Trade Commission is also reportedly investigating the planned merger.

The CMA said on March 29 that it was beginning phase two of its probe into the Broadcom-VMware deal, dashing the pair's hopes that the acquisition could be wrapped up quickly and cleanly. Broadcom told the CMA last month it wouldn't be offering any concessions to appease the regulator. 

In a newspaper interview, published just prior to the EC announcing its objections to the deal, VMware CEO Rangarajan Raghuram said he still expected the deal to close this autumn.

"Regulators are going through their work now. They are all proceeding on the timeline we anticipated, and they are on track to complete the transaction by the end of Broadcom's fiscal year," Reghuram said. Broadcom's fiscal year ends October 30.

In a statement to The Register, a Broadcom spokesperson confirmed the biz was still confident the deal would close during the company's current fiscal year, and said it would "continue to work constructively with the European Commission as part of their thorough review process." 

"We remain confident that this deal does not present any competition issues," Broadcom told us. "And we are confident that regulators will see this when they conclude their review." The spokesperson said the company had already received merger clearance to acquire VMware in Australia, Brazil, Canada, and South Africa. 

VMware's response to our questions was largely the same, with a spokesperson telling us it still expected the takeover to close on Broadcom's schedule and that it would "continue to respond to regulatory inquiries, as appropriate." 

With the EC advancing its investigation of the Broadcom-VMware deal to the formal objection stage, the corporations have the opportunity to submit responses, as well as request an oral hearing, before the commission makes its final decision on June 21. The UK's CMA has until September 12 to make its decision on the deal. ®