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Broadcom update: Layoff notices issued for some VMware employees

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There is a distinct good news-bad news scenario quickly developing now that Broadcom’s US$69 billion acquisition of VMware has been formally approved.

News of the monumental deal finally going through came last week with the approval by China, which resulted in Hock Tan, president and chief executive officer of Broadcom, issuing the following statement: “We are excited to welcome VMware to Broadcom and bring together our engineering-first, innovation-centric teams as we take another important step forward in building the world’s leading infrastructure technology company.

“With a shared focus on customer success, together we are well positioned to enable global enterprises to embrace private and hybrid cloud environments, making them more secure and resilient. Broadcom has a long track record of investing in the businesses we acquire to drive sustainable growth, and that will continue with VMware for the benefit of the stakeholders we serve.”

From a financial perspective, the good news is that, according to investment.com, analysts at UBS and BofA (Bank of America) raised their price targets for Broadcom in research notes today. BofA’s analysts “lifted their firm’s price target for the stock to US$1,200 from US$1,050 per share, reiterating a Buy rating on the stock,” an article stated.

The bad news revolves around VMware personnel departing, some by choice, others after receiving a layoff notice. Among those announcing they were leaving was former VMware CEO Raghu Raghuram, who on his LinkedIn page, posted a modified version of an internal email that he had sent out last Wednesday when the deal was finally approved.

It read, in part, “it has been my absolute privilege and honour to lead VMware for the last three years. During this time, we have navigated a dizzying journey together that spans the full lifecycle of a business — from raising debt financing to spinning off from Dell and operating as a standalone public company, to being acquired by Broadcom and executing through a complex regulatory process to finally arrive at this milestone moment in VMware’s history.

“Throughout it all, I have been amazed at the resiliency and focus of the VMware team as we repeatedly beat our financial goals, broke new ground with our product releases, and took time to celebrate the values that make us a special company.”

He went on to write, “Regardless of whether you are joining Broadcom or starting your next chapter elsewhere, I wish each of you the very best and all the success in making a positive impact in this world.

“As for myself, I plan to take a short break, rejuvenate, and then find a new and impactful mission into which I can pour my energy and passion. I will also continue my association with VMware as a strategic advisor to Hock Tan. I have no doubt that our paths will cross again. Until then, thank you, goodbye and good health.”

Other VMware employees will have no choice but to take a break after news broke yesterday that layoff notices had been issued to a number of them.

Scott Young, principal advisory director at Info-Tech Research Group, said today that layoffs at Broadcom were expected upon the closing of this deal.

The company, he said, has “a proven track record of efficiently integrating acquisitions and ensuring that its Total Debt to LTM Adjusted EBITDA ratio trends relatively rapidly downward. Its playbook to do this will include immediately eliminating duplicate and administrative functions wherever possible as soon as possible. The expectation would be that the bulk of layoffs will fall into these categories.”

The recent restructuring of VMware into four divisions (VMware Cloud Foundation, Tanzu, Software Defined Edge, Application Networking and Security), added Young, “shows that Broadcom sees growth in infrastructure and potentially has less interest in the (unmentioned) end user compute area of the business. This could potentially lead to another area where jobs could be eliminated.”

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