Broadcom’s VMWare takeover: IBM CEO Arvind Krishna gives deal conditional blessing
By Jenny McCall
12:24, 13 October 2022
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 (AVGO) and 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.
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.
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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.
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