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Broadcom’s VMWare takeover: IBM CEO Arvind Krishna gives deal conditional blessing

By Jenny McCall

12:24, 13 October 2022

A image of IBM CEO Arvind Krishna
Krishna said that VMware remains an important partner for his company - Photo: Getty Images.

Tech giant Broadcom Inc's (AVGO) acquisition of software company VMware (VMW) has hit the spotlight again this week, after IBM (IBM) CEO Arvind Krishna gave his opinion on the impending deal at an event on Tuesday.

Krishna said that VMware remains an important partner for his company and if VMware keeps investing in its products, it should remain “a strong franchise.”

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IBM  (IBM) speaks out on Broadcom (AVGO) takeover of VMware

“I think it’ll come down to what is going to happen in 2023 and 2024,” Krishna said.

“As long as they keep innovating on the products, they keep giving more function back to their clients—it’s a strong franchise. That falls away, then that’s a different question. But I think the virtualization world likes those products. Now it’s up to them to keep innovating.”

Krishna’s comments signal that IBM  (IBM) will continue to do business with VMware – even after the acquisition has taken place, which is good news for both Broadcom (AVGOand VMware.

But despite this, Krishna comments were not needle moving movements for either company, as both saw a drop in stock price on Tuesday.

VMware’s stock price has also seen better days and since the announcement in May it has fallen 12%. Broadcom's share price has been down by 10% since the takeover statement was made in May and plummeted 39% this year.

A provider of multi-cloud services for apps, VMW is to be acquired for $61bn (£50bn) based on the closing price of Broadcom common stock on 25 May 2022. 

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Short position overnight fee 0.0040%
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In a statement put out by VMware, the group said under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, VMware shareholders can either elect to receive $142.50 (£118.55) in cash or 0.2520 shares of Broadcom common stock for each VMware share they have.

 

IBM (IBM) share price chart

More than a marriage of convenience

For VMware the deal is more than a marriage of convenience.

Brad Tompkins, executive director of VMware said: “An acquisition like this brings options,” Tompkins said.

“As VMware will continue as the software division of Broadcom (AVGO), this creates a complementary portfolio of solutions. Our members want to know what the details will be about the portfolio and what flexibility it will give them as VMware customers.”

Although no specific date has been agreed, the transaction is expected to be completed in Broadcom’s (AVGO) fiscal year 2023 and is subject to the receipt of regulatory approvals and other customary closing conditions. 

Once the deal is complete, Broadcom Software Group will be rebranded and operate as VMware.

Markets in this article

AVGO
Broadcom
1325.71 USD
6.17 +0.470%
IBM
IBM Corp (Extended Hours)
191.17 USD
0.48 +0.250%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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