China's regulator paused VMware purchase probe before desired close date
Competitors predict price gouging as employees await news
Analysis China's State Administration for Market Regulation approved Broadcom's acquisition of VMware, and also revealed it suspended deliberations on the matter on September 25 and only resumed on November 17 – beyond the October 30 date Broadcom set as its target for the deal to close.
That timeline is detailed in the Administration's (SAMR's) decision to allow the deal.
SAMR debated the same issues other antimonopoly regulators around the world had already considered: that VMware dominates the virtualization market, Broadcom does likewise for fibre channel host bus adapters (HBAs), and a combined company could stop certifying third-party adapters to operate with Virtzilla's wares.
Broadcom would therefore be able to milk VMware users and reduce competition.
The acquisition was allowed to proceed on condition Broadcom guarantees ongoing interoperability between VMware software and rivals' hardware – essentially the same requirement demanded by South Korea, the UK, and the European Union.
The Register would argue that Broadcom not allowing VMware's products to work with rivals' hardware would be very stupid given VMware's reputation was built on interoperability, and that dominating the HBA market is not a prize worth the price of a diminished Virtzilla.
Now for the scary part
News that the deal will conclude means attention now turns to how Broadcom will deliver its promised outcomes: increasing VMware's EBITDA, while also spending more on R&D, giving a greater role to VMware's channel, making the virty giant's software easier to implement, and moving customers to subscriptions.
Plus cutting jobs. The Register understands that some US-based VMware employees have already received offers to transfer their employment to Broadcom. Those yet to receive such letters may have been told they cannot expect one in future.
That interpretation of an internal email from outgoing VMware CEO Raghu has not gone down well, given the Thanksgiving holiday falls this week. It's never a good time to be laid off. Seeing the axe swing in your direction ahead of a holiday is doubly nasty.
Outside the US, The Register understands VMware is yet to start the process of informing staff of their options. Rumours suggest the firm's Costa Rica operations are at risk.
- Beijing's silent treatment topples Tower Semiconductor merger with Intel
- VMware revealed Symantec SASE integration plan before Broadcom finished buying it
- VMware reveals critical vCenter vuln that you may have patched already without knowing it
- Don't super-size me – China defines rules for 'super-large' platforms
Speculation about whether Broadcom intends to retain all VMware products can also be found. Broadcom's Symantec acquisition means it already covers plenty of the functions delivered by VMware’s Carbon Black security software unit. End-user computing – VMware’s term for app and desktop virtualization, plus device management – has not grown quickly for years.
VMware's competitors are focusing their efforts on Broadcom's reputation for being unafraid to hike prices and strive for lock-in with large clients.
"If you look at its history, Broadcom's whole business model has been to maximize acquired assets in two to three years," Nutanix president and CEO Rajiv Ramaswami told The Register. "VMware customers will feel this. From their customers to their employees, we're hearing concerns over these changes."
Bryan Cantrill, co-founder of recently on-prem cloud upstart Oxide also flung a little FUD.
"Customers know what's coming: Broadcom's projected growth in EBITDA from VMware will come out of the hide of their strained IT budgets – and they are actively looking for alternatives," he said.
Oxide, like Nutanix, offers its own hypervisor so that customers don't need to run and pay for VMware's ESXi. Microsoft also made its Hyper-V hypervisor very cheap compared to VMware's wares, but that strategy didn't work.
Microsoft's attack was directed at VMware's upswing to market dominance. These attacks on VMware come at a moment when the virtualization giant’s customers are apparently curious about possible alternatives – both because they're leery of Broadcom and (sensibly) because technology has evolved and now presents different alternatives.
Broadcom, however, has bet that VMware will build a strong position for multi-cloud management, and by promising to give VMware's channel more to do appears to be suggesting it wants to support a diverse range of customers.
It's lazy journalism to conclude stories with the observation "time will tell." But eighteen months downstream from the shock announcement of Broadcom's plans and there's not much else left to say.
Whatever happens, The Register's virtualization desk will be watching and listening. ®