VMware President Sumit Dhawan tried to reassure its more than 35,000 employees that if the company was acquired by Broadcom, the semiconductor company wouldn’t handle VMware the same way its treated other large companies it has acquired—specifically Symantec and CA Technologies.
“Let’s not assume, I would say at this point in time, that just because they have done what they have done with Symantec and CA [Technologies] is something that they intend to do with VMware because we’ve heard quite the opposite so far,” said Dhawan in a recent town hall meeting with VMware employees. “But we’ll get some more certainty over the course of next 60 to 90 days.”
VMware’s top executives fielded questions from VMware employees at the town hall about the future of the company if it is acquired by Broadcom for $61 billion.
VMware leaders were specifically asked what employees should tell their customers who express concern about VMware being purchased by Broadcom.
“Listen, the customer reputation of Broadcom can be negative and also the team members and the actions they have taken in the past with their software businesses have impacted the employees and team members,” said Dhawan (pictured above). “I understand this uncertainty and we have to work with them over the course of next 60 to 90 days to get some of these things clarified, but what we heard from them at least address some of the initial concerns.”
Dhawan said Broadcom, unlike prior acquisitions it has made, wants the VMware brand front and center, leading the combined company’s entire software business. If completed, Broadcom’s software group will rebrand and operate as VMware, which will incorporate Broadcom’s existing infrastructure and security software solutions.
“The reason why they’re acquiring a sizable premium on top over the current stock price is because they value our broad portfolio and amazing customer relationships with the values we have in terms of helping customers and driving innovation. And they think that they want to have investment across all of those three things,” said Dhawan. “So that’s sort of their philosophy in terms of customer concerns.”
VMware’s president said both VMware’s and Broadcom’s team is available to have one-on-one conversations with concerned customers.
Cuts Followed Broadcom’s Acquisition Of Symantec And CA Technologies
Broadcom has a history of making large, multibillion-dollar acquisitions of global IT companies that are already established in the market on a worldwide basis, similar to VMware.
In late 2019, Broadcom acquired Symantec’s Enterprise Security business for $10.7 billion. In 2018, Broadcom completed its acquisition of software giant CA Technologies for nearly $19 billion in an all-cash deal.
Since Broadcom acquired Symantec’s security business and CA Technologies’ software portfolio, it has cut the cost base at those two businesses by 60 percent to 70 percent, according to a report from Sanford C. Bernstein & Co.
Broadcom plans to increase VMware’s annual profitability from $4.7 billion to $8.5 billion within the first three years of closing the deal. Broadcom said it will achieve this, in part, by “eliminating duplicative general and administration functions across human resources, finance, legal, facilities and information technology.”
Broadcom Has No Intention To ‘Significantly’ Adjust VMware’s Portfolio Strategy
In terms of customer disruption caused by Broadcom’s acquisition, VMware’s Dhawan said Broadcom does not have any intentions to make major changes to the company’s product roadmap.
“They don’t intend to have any significant adjustment in our product portfolio strategy, which makes us being able to do business with customers in a similar fashion,” said Dhawan. “I do understand it will cause some additional complexities and we’ll work out the process for it and then for the team members—anyone who’s engaged with building amazing customer relationships, servicing the customer—that’s a huge value to Broadcom.”
VMware’s president said the company is going to work with Broadcom on “addressing how the operating model is going to work on the go-to-market front.”
For the time being, Dhawan said “it’s business as usual” for VMware.
Shaun Maine, CEO of Converge Technology Solutions who partners with VMware, said Broadcom’s main strategy for VMware, if acquired, should be to keep VMware fully intact.
“My message to Broadcom is realize that VMware is important to lots of people,” said Maine. “The magic of what you’ve bought is the fact they run everywhere.”
Maine likes the idea of optimizing specific Broadcom products with VMware technology, but the goal for Broadcom should be to not “mess up” VMware both internally and externally for customers.
In the current agreement, VMware now has a 40-day “go-shop” provision that allows VMware and its board to actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals. The provision expires on July 5, 2022.
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