Chipmaker Broadcom to Buy Cloud Services Firm VMware for $61 Billion | ECONOMY

Broadcom Inc announced it will acquire cloud computing company VMware Inc in a $61 billion cash-and-stock deal, the largest and boldest bid by the semiconductor maker to diversify into enterprise software.

This is the second largest global acquisition so far this year, only behind the agreement of Microsoft Corp for $68.7 billion to buy the video game maker Activision Blizzard Inc.

The offer price of Broadcom of US$ 142.50 per share of VMware it represents a nearly 49% premium over last session’s close, when deal talks were first reported on May 22. Broadcom will also assume $8 billion of VMware’s net debt.

The CEO of Broadcom, Hock Tanwho built his company into one of the world’s largest semiconductor makers through acquisitions, is taking its operations strategy to the software sector.

In one fell swoop, the deal will nearly triple Broadcom’s software-related revenue to about 45% of its total sales.

Broadcom it will instantly rise as a major software player with the acquisition of VMware, said Daniel Newman, an analyst at Futurum Research.

“Having something like VMware there will be a significant number of doors open that with your current portfolio probably wouldn’t have been open to you.”, he added Newman.

The deal also represents a setback for the CEO of Dell Technologies Inc, Michael Dellwho separated VMware from the computer maker last year.

Michael Dell owns a 40% stake in VMwarewhile its main financial player, Silver Lake, a private equity firm, owns 10%.

VMware will be able to solicit bids from rival bidders for 40 days as part of the deal.

The turn of Broadcom toward software began after his attempt to acquire mobile semiconductor giant Qualcomm Inc., a deal that was blocked by the former chairman of USA Donald Trump in 2018 for reasons of national security.

Since then, Broadcom took over commercial software company CA Technologies Inc for $18.9 billion and acquired the security division of Symantec Corp for $10.7 billion. He also explored acquiring analytics software company SAS Institute Inc, but did not proceed with an offer.

VMware is dominant in the so-called virtualization software market, allowing corporate customers to run multiple applications on their servers.

This business began to slow down as companies found new tools to operate through cloud computing, prompting VMware to look for new offerings, including through a partnership with Amazon.com Inc.

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