Broadcom boss dismisses notion China could derail VMware buy
As Nutanix celebrates Cisco hook-up and quirky cloud repatriations
Broadcom CEO Hock Tan has dismissed concerns that China could derail the semiconductor giant's acquisition of VMware.
UK authorities recently approved the deal, and US authorities haven't raised objections within a timeframe that would indicate Uncle Sam intends to halt the transaction ahead of its expected October 31 conclusion.
Think it through, read it through and let's stop right there
But China has been quiet on the matter. Which matters, because Beijing recently prevented Intel from acquiring Israeli firm Tower Semiconductor – perhaps to flex its muscles in response to numerous US-led actions against Middle Kingdom tech companies.
On Broadcom's Q3 earnings call, Tan said the deal has won "foreign investment control clearance in all necessary jurisdictions."
But that statement wasn't enough for Piper Sandler analyst Harsh Kumar, who asked if China would be a problem.
"Let me say this," Tan replied. "I made those specific notes or remarks on regulatory approval. I ask that you think it through, read it through and let's stop right there."
Broadcom posted $8.9 billion revenue for the quarter – up five percent year-on-year. Net income of $3.3 billion was a $229 year-on-year jump.
Tan said Broadcom's networking business grew 20 percent year-on-year to $2.8 billion, with hyperscalers and other customers keen to build bigger networks to cope with general growth and the impact of expanding generative AI workloads.
"Over the past quarter," he said, "we have already received substantial orders for our next-generation Tomahawk 5 switch and Jericho3-AI routers and plan to begin shipping these products over the next six months to several hyperscale customers," he announced, adding that those orders will see 400-gigabit networks replaced by 800-gigabit-capable links.
"And beyond this, for the next-generation 1.6-terabit connectivity, we have already started development on the Tomahawk 6 switch, which has, among other things, 200G SerDes generating throughput capacity of over 100 terabit per second," he said.
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Broadcom Software, soon to be renamed VMware, delivered revenue of $1.9 billion and five percent year-on-year growth. Tan touted improved contract renewal rates among customers, and strong cross-selling of products. Annual recurring revenue for Broadcom software was projected at $5.3 billion – and that's without the addition of VMware, as Tan declined to offer guidance for the impact of the acquisition.
VMware's (probably) last set of numbers
It's not hard to guess what that impact will be because VMware also announced its quarterly results on Thursday US time, revealing quarterly revenue of $3.41 billion – a two percent increase compared to last year's Q2.
Subscription and SaaS revenue rose 34 percent year-over-year to $1.26 billion, and delivered 37 percent of all revenue.
Net income of $477 million was $130 million which was 34 percent higher year-over-year. All of which suggests this time next year Broadcom's balance sheet could see an extra $12 billion of revenue and plenty of net income.
Or maybe rivals could nibble at those sums. As The Register has reported, Citrix spin-out XenServer has launched a VMware migration package, and Nutanix has told us of heightened interest in its wares as customers look for a VMware alternative.
On Nutanix's Q4 earnings call – which also took place on August 31 – CEO Rajiv Ramaswami said that interest has persisted and led to a seven-figure deal.
He also revealed quarterly revenue of $492 million – a year-on-year 28 percent jump.
Full year revenue of $1.86 billion represented 18 percent growth. Annual recurring revenue is the number Nutanix cares about most and it reached $1.56 billion for the year – up 30 percent. Nutanix still posted quarterly and annual losses, but felt in sufficiently fit financial condition to initiate a $350 million share buyback.
In conversation with The Register, Ramaswami said customers are willing to spend "for the right reason" when they have need to invest in new initiatives, or refresh hardware.
He also said Nutanix sees plenty of upside in the Cisco partnership it announced this week, which will see Switchzilla's sales team sell Nutanix's wares on UCS servers – and be compensated for it as if they'd sold Cisco's own products. Ramaswami said Nutanix sees an addressable market of 100,000 customers, and that the Cisco deal makes it easier for Nutanix to reach more of them and grow beyond its current 25,000-customer base.
On Nutanix's earnings call, Ramaswami was asked about cloud repatriations – movement of workloads out of hyperscale clouds to on-prem resources.
He responded by saying he's seen a few, but a more interesting trend among Nutanix customers is "they are not able to get their applications really to public cloud as quickly as they would like." Such problems are compounded by the fact that those users have committed to certain levels of cloud spend.
Those customers are then noticing that they can acquire Nutanix licenses in the AWS or Azure cloud marketplaces, which lets them spend money committed to clouds and use Nutanix's wares to ease their cloud migrations.
That scenario will be welcome news to … Broadcom's Hock Tan, who has repeatedly said he values VMware because the world is going muticloud and Virtzilla has the best products to tame it.
In China, or anywhere else. ®