The time it took for the US$69 billion purchase of VMware by Broadcom to finally be approved has potentially affected VMware’s standing and share value in the cyber security industry, says data and analytics firm GlobalData.
In a statement issued today following an announcement that China had given the May 2022 purchase the green light – the final hurdle in an extremely lengthy approval process – it noted that while both Broadcom and VMware’s cybersecurity portfolio strengths in network, endpoint and cloud security align, it still has concerns.
Rajesh Muru, principal technology analyst at GlobalData, said, “VMware is an established player with a solid foundation and strategy, and this cuts across its cybersecurity portfolio. Even though China has approved the deal with restrictive conditions, the acquisition post-closure will continue to create uncertainty for its cybersecurity customers, particularly on larger cybersecurity deals, in an already aggressively competitive market.”
He added that in a market expected to reach over US$282 billion by 2027 that will be “fueled with end-to-end security monitoring for distributed customer cloud environments in zero trust settings, coupled with observability data monitoring, the competition is aggressive, with the likes of Cisco, Palo Alto Networks and Zscaler. If Broadcom is not careful, the potential impact on VMware’s brand equity could be high in the short-term due to customer uncertainty, and this could cover portfolio consolidation for its cybersecurity business.”
The statement went on to say that while VMware’s total revenue for Q2 of fiscal year 2024 was US$3.41 billion, an increase of two per cent compared to fiscal 2023, the delay in the transaction closing has impacted VMware’s share value.
This is the opposite effect to that on Broadcom shares, which a week ago were at a positive US$957.52, potentially influenced by Broadcom’s direction on artificial intelligence (AI) in relation to its semiconductor chip business, it said.
Hock Tan, president and chief executive officer of Broadcom, said, “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.”