Broadcom is refocusing VMWare on creating private and hybrid cloud environments for large enterprises and divesting its non-core assets.
Within weeks of closing the VMWare acquisition, Broadcom is already planning to pull the shutters down on two key units for the virtualization provider — end-user computing and security — while it refocuses on VMware’s core competencies.
“We’re now going to invest and focus our sales and R&D on those core areas of VMware Cloud Foundation,” Broadcom CEO Hock Tan said during the company’s earnings call on Friday.
“End-user computing, Carbon Black, good assets as they may be, we prefer now to divest them. We’ll find good homes for them because there are a lot of very interested parties who are more than happy to take those assets,” he continued.
Broadcom’s $69 billion acquisition of VMware hasn’t been an easy transition, NetworkWorld reported earlier.
Trouble brewing with layoffs and top executive exits
The company is facing challenges with layoffs, the loss of Sumit Dhawan, a key executive, and concerns over retaining customers, amid fears that the acquisition could stifle innovation and lead to defections, with Forrester Research plotting some bearish predictions.
Tan said Broadcom is refocusing VMWare on creating private and hybrid cloud environments for large enterprises and divesting its non-core assets.
All this comes as the global market continues to look rosy for IT and cloud spending. Recently, Gartner forecasted that most major markets would see healthy growth in IT spending for 2024, including Europe, where it’s projected to be up 9% for the year, and India, which is projecting 11% growth.
Globally, IT spending is on track to jump 8% worldwide in 2024, the research firm said.
Broadcom forecasted a consolidated revenue of $50 billion for fiscal year 2024, with significant contributions from VMware and anticipated mid to high single-digit percent growth in semiconductor solutions revenue.
Revenue from wireless and server storage segments experienced downturns.
Like many other IT and semiconductor companies, Broadcom is seeing a bump in revenue attributable to AI, close to $1.5 billion in Q4 revenue, or a 15% increase over last year, and this is projected to grow.
“We expect revenue from generative AI to represent more than 25% of the semiconductor revenue, consistent with prior guidance, which more than offset the lack of growth from non-AI semiconductor revenue,” Tan said, pointing to Ethernet solutions and AI accelerators as significant growth areas for the company.
Bring your ‘butt’ back to office
Tan has implemented a strict return-to-office policy, which hasn’t proven to be popular with some staff.
“VMware has a beautiful campus in Palo Alto that remains empty,” Tan reportedly told employees in August 2022. “Real estate isn’t cheap.”
This has been escalated to a mandate to return to the office if you live within 50 miles of one – or have a superb performance record.
“If you live within 50 miles of an office, you get your butt in here,” he said, “Any other exception, you better learn how to walk on water if you want to work remote.”
