Broadcom is planning to buy cloud service provider VMware for $60 billion as it plans to expand its business to include enterprise software. An official announcement could be made as early as Thursday, if the negotiations are successful.
According to the Wall Street Journal, the chip manufacturer is in talks to pay up to $140 per share in cash and stock to buy out Vmware. VMware shares soared 25 percent on Monday, after it was first reported by Bloomberg that acquisition talks are underway. Broadcom's shares slid 3 percent the same day.
Since the chip manufacturer specializes in developing a wide range of electronics, it is expected to hugely benefit from the acquisition. The acquisition would give Broadcom access to VMware's data centers where the cloud service provider's technology is a linchpin for its consumers.
"The acquisition of VMware would be considered as making strategic sense; consistent with Broadcom's focus on building out a deepening enterprise infrastructure software strategy," Wells Fargo analysts said, as per Reuters.
Bernstein research analysts also agree that such an acquisition would not only "triple the size of Broadcom's software segment" but could also result in the overall software mix to reach an impressive 50 per cent.
According to the Register, even though the takeover negotiations are going on, there is no indication of the talks resulting in an agreement. No official statement has been released from any of the companies. Analysts believe that, Michael Dell, the biggest investor of VMware with 40% stakes, has a number of reasons to object to the acquisition as the company's share price has significant declined over the past few months, from $167 in October 2021 to around $95 in May 2022.
With a current market valuation of $50 billion, ever since VMware completed its spinoff from Dell Technologies last year, it has shifted focus on conducting autonomous operations of a multi-cloud strategy, accompanied by a simplified capital structure and financial flexibility.
With software being its main focus, Broadcom has previously acquired CA Technologies in 2018 and enterprise security business of Symantec Corp. in 2019. If the deal with VMware is finalized it could be the biggest ever acquisition of a tech company.
