Tech News

EU reviews $61bn Broadcom-VMware deal over competition concerns • InNewCL

EU reviews $61bn Broadcom-VMware deal over competition concerns • InNewCL

#reviews #61bn #BroadcomVMware #deal #competition #concerns #InNewCL Welcome to InNewCL, here is the new story we have for you today:

Click Me To View Restricted Videos

When Broadcom announced it would spend a staggering $61 billion on VMware in May, it seemed only a matter of time before the deal caught the attention of regulators, particularly in Europe and the UK

Indeed, this week the EU announced that it was officially investigating the deal. In an official statement, EU Vice-President Margrethe Vestager, in charge of competition policy, feared the deal would have negative effects on competition:

“Broadcom, a major hardware component vendor, is acquiring VMware, a major server virtualization software vendor. Our initial investigation showed that it is imperative for hardware components in servers to work with VMware’s software. We worry that after the merger, Broadcom could prevent its hardware competitors from working with VMware’s server virtualization software. This would result in higher prices, lower quality and less innovation for customers and consumers,” Vestager said in an official statement at the start of the transaction.

It’s an interesting issue. Broadcom is a chip company, but it’s also spending big bucks to get the company. It seems that limiting the market for VMware services would not be in the company’s best interest and making it independent (much like IBM and Red Hat work) would be the wisest course of action.

This is certainly something Dell recognized when it bought the company as part of EMC’s $58 billion acquisition (which was announced at $67 billion) in 2015. VMware was operating as a separate company as part of EMC when it was acquired. And Dell continued that practice, allowing VMware to sell to a variety of customers rather than being limited to its own hardware offerings, knowing that the company operated best as an independent and neutral vendor.

Dell eventually spun off VMware as a separate company in 2021, a move that made it more vulnerable to takeover bids. In fact, we speculated at the time who might buy the company. Broadcom wasn’t on our radar, but another chipmaker, Intel, was. We speculated that one of the cloud companies might buy it, or an old-school company like IBM or Oracle. But when the news broke, it was Broadcom, and for a lot of money.

The EU is not the only one looking at this deal. Just last month, the UK’s Competition and Markets Authority (CMA) announced that it was also launching an investigation into the deal. The US FTC is also reportedly reviewing the takeover, according to CRN.

Deals of this magnitude come under increasing scrutiny, and we’ve seen some large deals fail this type of scrutiny over the past few years. Visa scrapped the deal to buy Plaid in early 2021 after the Justice Department scrutinized the transaction and the companies decided a protracted legal battle wasn’t worth the trouble.

Nvidia pulled out of a $40 billion deal to buy ARM earlier this year for similar reasons. When it seems like these monitoring organizations are taking a closer look at what could get expensive, sometimes the easiest thing to do is call the whole thing off.

We’ll see if that happens with this deal or if it’s just an obstacle in the way before the two companies come together next year.

Click Here To Continue Reading From Source

Related Articles

Back to top button