‘An Era Has Ended’: Inside the $61 Billion Broadcom-VMware Deal Rocking the Software Industry

By | Managed Services News

May 26

“VMware was in a quandary,” an analyst told Channel Futures.

Partners and analysts are giving mixed reactions to Broadcom’s plans for a massive acquisition of VMware.

Broadcom and VMware announced the $61 billion deal on Thursday. It represents another step in Broadcom’s expensive efforts to expand its software portfolio through inorganic growth. It would raise Broadcom’s software mix from 23% of the company’s revenue to just under one-half. On the other hand, the industry has widely characterized the move as a good financial outcome for VMware and billionaire Michael Dell. One partner said the companies offer solid synergies. But some analysts are scratching their heads as to how it will add value to VMware partners and customers.

Anurag Agrawal, described the deal as “excellent” for VMware and VMware shareholders. Moreover, he said the deal makes sense given the market challenges VMware was facing.

Virtual to Cloud-Native

Techaisle's Anurag Agrawal

Techaisle’s Anurag Agrawal

“Nineteen years later, an era has ended, starting a new beginning. Customers and partners become cynics for every large deal because they lack product road-map clarity and commercial relationships,” Agrawal told Channel Futures. “VMware was in a quandary. Customer demands have been shifting from virtualized environments to cloud-native. The center of cloud gravity has moved to the hyperscalers. Cloud has fundamentally reshaped the consumption of IT resources. By providing buyers with variable-cost access to software, software development environments, core processing, storage resources, and even specialized skills, the cloud’s anything-as-a-service model prompts a massive shift in IT spending from traditional products to on-demand alternatives. As a result, the transition from conventional products to ‘aaS’ has been fundamentally disruptive to VMware.”

Agrawal said earlier this week that Broadcom would benefit from leaving VMware free to continue its partner transformation strategy.

Agrawal and several other analysts shared their reactions to the acquisition. In addition, a longtime VMware channel partner shared its perspective on how the deal could impact customers.

See our slideshow above to see commentary from channel partners and analysts about the deal.

Allison Francis contributed to this report.

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