Broadcom CEO: What the VMware merger will look like

There has been much teeth-gnashing, mixed with a little obfuscation and concern, about what the merged VMware and Broadcom might look like and what it will mean to customers.   

Broadcom President and CEO Hock Tan has taken to his blog to offer some details about what he expects the deal will mean to Broadcom and try to ease some customer concerns.

One worry: cost of products going forward. 

“Following the purchases of CA and Symantec, Broadcom raised prices, decreased support, and stopped investing in innovation,” Tracy Woo, senior analyst for Forrester told Network World in a recent article. “VMware customers would be wise to have an exit plan,” she cautioned.

Then there is Broadcom’s track record of not only hiking prices, but also trimming operating budgets and cutting support after acquisitions—a track record which, according to a survey by 451 Research, already worries VMware’s existing customers.

Tan addresses fears of Broadcom price hikes

Addressing these issues, Tan stressed that the focus of the merger is not on price increases.

“VMware develops technology for the future and addresses a growing market. The Broadcom business case for this transaction is premised on focusing on the business model, increasing R&D, and executing so that customers see the value of the full portfolio of innovative product offerings — not on increasing prices,” Tan wrote.  “Following the close of the transaction, we will invest in and innovate VMware’s products so we can sell even more of them and grow the VMware business within enterprises, deepening and expanding the footprint instead of potentially raising prices.”

Tan also highlighted the company’s long-term intentions.

“Our growth into a global technology leader was not based on taking existing products and raising their prices, but by creating technology and products that provide clear value to customers and continuing to improve them,” Tan wrote. “We fuel growth by offering more and better products so customers are using more of our entire portfolio of technology products, rather than just one or two. By delivering long-term value to customers and investing in improved, customer-focused R&D, we can innovate, scale and offer better products without raising prices.”

One of the other concerns expressed but some industry watchers is how Broadcom will move multicloud and cloud software forward especially as VMware develops new packages such as its recent raft of new multicloud products introduced at its VMware Explore 2022 conclave in August. 

Those new products included a SaaS-based upgrade for the company’s core networking software, NSX, as well a new cloud-native management service, VMware Aria, and integrated security features. VMware Explore Europe is next week, where more products will be shown off and introduced.

Broadcom’s VMware buy fuels multicloud vision

Tan said that customers are enthusiastic about the Broadcom and VMware multicloud vision and, “with increased resources from Broadcom following transaction close, the potential to implement it as VMware grows and increases momentum in the space.”

“For some time, Broadcom has recognized that the future of enterprise IT is multi-cloud—the ability to distribute applications and services across a combination of clouds. It’s one of the many reasons Broadcom solutions complement what VMware does in the multi-cloud space across private, public, edge and sovereign clouds today. It’s clear our customers have already adopted this mindset, too,” Tan wrote.

Customers are similarly excited about VMware’s momentum around cloud-native apps, Tan said. 

“Containers are changing the way modern applications are built, resulting in faster and more predictable development and deployment. Developers also can take advantage of Kubernetes clusters, which more efficiently use the containerized infrastructure that power those applications,” Tan said.  

“By providing customers with the environment and hands-on guidance to help build cloud-native applications quickly and upskill their teams along the way, a combined Broadcom-VMware can help them drive forward their businesses,” Tan stated.

Tanzu is key for cloud-native app development

Tan also drilled down into the position that the Tanzu app-development product portfolio will have in the merged company.

“Many customers and partners are asking me how I see the VMware Tanzu portfolio and Broadcom’s future commitment to the Tanzu business. My answer to them is that I see Tanzu as a strategic part of the VMware software portfolio and it will remain that way as we move forward within Broadcom,” Tan stated.

“VMware Tanzu customers are running some of the most mission critical applications in the world. As customers think about future investments in cloud native applications and the modern application development space, they should feel confident in Broadcom’s commitment going forward,” Tan stated.

Broadcom said it would acquire VMware in May for about $61 billion.  There have been published reports from Reuters and others that Broadcom has recently tried to fast-track antitrust approval from the European Union, saying that AWS, Microsoft and Google are huge competitors already and that approving this deal won’t unhinge competition.

“Things are on track,” said VMware CEO Raghu Raghuram at the Explore event recently. “They’re going through all of the regulatory approvals, on the one hand. On the other hand, we are working with the Broadcom team and helping them understand the depth and breadth of our business and product portfolio. And in the meantime, as we are required to, we are operating as a completely independent, standalone company with our own execution track and strategy.”

The deal isn’t likely to close until sometime next year.