Broadcom braced for full EU investigation into $61B VMware buyout
(2022/12/12)
- Reference: 1670851809
- News link: https://www.theregister.co.uk/2022/12/12/broadcom_braced_for_eu_investigation/
- Source link:
Broadcom may be facing an in-depth investigation into its $61 billion takeover of VMware by EU competition watchdogs, dashing the corporation's earlier hopes that its buyout would not meet any major regulatory hurdles.
According to [1]reports , a full-scale probe into Broadcom’s planned buy of the cloud and virtualization biz is likely to be announced on December 20, following a state of play meeting between Broadcom and the European Commission last week.
The pair [2]officially notified the European Commission about the proposed takeover in November, when Broadcom was said to be hopeful the purchase would simply be waved through rather than undergoing an in-depth antitrust investigation that might add months to the approvals process and thus delay the completion date.
[3]
As The Register reported in October, Broadcom believed it could [4]convince European regulators that its buy would actually create more competition in the cloud market, which is dominated by Microsoft, Amazon, and Google.
[5]
[6]
It now appears likely the European Commission will initiate a full-scale antitrust investigation into the deal, according to Reuters, which cites anonymous sources "familiar with the matter." The deadline for the antitrust body to complete its review of the acquisition is expected to be sometime in May next year.
If so, this would mean approval would not be granted for an entire year since the acquisition was [7]announced by Broadcom and VMware earlier this year.
[8]
The UK government's Competition and Markets Authority (CMA) announced late in November that it was [9]opening a preliminary inquiry into the tie-up. The CMA invited comments on the transaction from any interested party, with a deadline of Dec 6, but has yet to set a deadline for a decision on whether an investigation under the merger provisions of the Enterprise Act 2002 is warranted.
Meanwhile, in the US, a review of the agreement by the Federal Trade Commission is understood to be focusing on "conglomerate effects of the combination," as it believes there are no real overlaps between the business areas the two companies already operate in, except perhaps Endpoint Security.
However, the sale has been dogged by fears among VMware customers that Broadcom would seek to raise the prices it charges following the takeover. The company has had to issue several denials, including [10]one just at the start of this month.
[11]
Only last week, Broadcom CEO Hock Tan said on the company's [12]Q4 2022 earnings call that it was making progress with various regulatory filings around the world, having received merger clearance in Brazil, Canada and South Africa.
[13]Cloud customers are wasting money by overprovisioning resources
[14]Broadcom tries to quash VMware price rise rumors as CEO promises they won't
[15]VMware refreshes desktop hypervisors, adds Apple Silicon support
[16]WTF is Sovereign SaaS? VMware's way to satisfy pesky regulators your cloud is local
Tan did issue a note of caution, saying: "We anticipate the timeline for the review process would be more extended in other key regions, especially given the size of this transaction." However, he added that Broadcom is "still confident that this transaction will close and be completed in our fiscal 2023," which started in November.
"The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era. And we are confident that regulators will see this when they conclude their review," Tan said.
Broadcom CFO Kirsten Spears confirmed the company's revenue reached $8.9 billion for Q4, up 21 percent over the same period last year. Nearly 80 percent of this was accounted for by Broadcom's semiconductor solutions business, at $7.1 billion, which was up 26 percent on last year. Revenue for the infrastructure software division stood at $1.8 billion, up 4 percent year-on-year.
Broadcom said revenue in the fiscal first quarter would be about $8.9 billion, compared with an average analyst estimate of $8.8 billion, but declined to give full-year guidance for fiscal 2023, citing economic conditions. ®
Get our [17]Tech Resources
[1] https://www.reuters.com/markets/deals/broadcom-faces-eu-antitrust-probe-into-61-bln-vmware-deal-sources-2022-12-09/
[2] https://www.theregister.com/2022/11/16/broadcom_looks_for_eu_approval/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Y5deM8f7eY9qQSf0EZA2sgAAAIo&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://www.theregister.com/2022/10/17/broadcom_vmware_cloud_eu/
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y5deM8f7eY9qQSf0EZA2sgAAAIo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y5deM8f7eY9qQSf0EZA2sgAAAIo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2022/05/26/broadcom_vmware_merger/
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y5deM8f7eY9qQSf0EZA2sgAAAIo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2022/11/22/competition_and_markets_authority_vmware_broadcom/
[10] https://www.theregister.com/2022/12/01/vmware_broadcom_prices_nutanix_q123/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y5deM8f7eY9qQSf0EZA2sgAAAIo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[12] https://www.fool.com/earnings/call-transcripts/2022/12/09/broadcom-avgo-q4-2022-earnings-call-transcript/
[13] https://www.theregister.com/2022/12/07/cloud_customers_overprovision/
[14] https://www.theregister.com/2022/12/01/vmware_broadcom_prices_nutanix_q123/
[15] https://www.theregister.com/2022/11/21/vmware_workstation_fusion_updates/
[16] https://www.theregister.com/2022/11/08/vmware_explore_europe_sovereign_saas/
[17] https://whitepapers.theregister.com/
According to [1]reports , a full-scale probe into Broadcom’s planned buy of the cloud and virtualization biz is likely to be announced on December 20, following a state of play meeting between Broadcom and the European Commission last week.
The pair [2]officially notified the European Commission about the proposed takeover in November, when Broadcom was said to be hopeful the purchase would simply be waved through rather than undergoing an in-depth antitrust investigation that might add months to the approvals process and thus delay the completion date.
[3]
As The Register reported in October, Broadcom believed it could [4]convince European regulators that its buy would actually create more competition in the cloud market, which is dominated by Microsoft, Amazon, and Google.
[5]
[6]
It now appears likely the European Commission will initiate a full-scale antitrust investigation into the deal, according to Reuters, which cites anonymous sources "familiar with the matter." The deadline for the antitrust body to complete its review of the acquisition is expected to be sometime in May next year.
If so, this would mean approval would not be granted for an entire year since the acquisition was [7]announced by Broadcom and VMware earlier this year.
[8]
The UK government's Competition and Markets Authority (CMA) announced late in November that it was [9]opening a preliminary inquiry into the tie-up. The CMA invited comments on the transaction from any interested party, with a deadline of Dec 6, but has yet to set a deadline for a decision on whether an investigation under the merger provisions of the Enterprise Act 2002 is warranted.
Meanwhile, in the US, a review of the agreement by the Federal Trade Commission is understood to be focusing on "conglomerate effects of the combination," as it believes there are no real overlaps between the business areas the two companies already operate in, except perhaps Endpoint Security.
However, the sale has been dogged by fears among VMware customers that Broadcom would seek to raise the prices it charges following the takeover. The company has had to issue several denials, including [10]one just at the start of this month.
[11]
Only last week, Broadcom CEO Hock Tan said on the company's [12]Q4 2022 earnings call that it was making progress with various regulatory filings around the world, having received merger clearance in Brazil, Canada and South Africa.
[13]Cloud customers are wasting money by overprovisioning resources
[14]Broadcom tries to quash VMware price rise rumors as CEO promises they won't
[15]VMware refreshes desktop hypervisors, adds Apple Silicon support
[16]WTF is Sovereign SaaS? VMware's way to satisfy pesky regulators your cloud is local
Tan did issue a note of caution, saying: "We anticipate the timeline for the review process would be more extended in other key regions, especially given the size of this transaction." However, he added that Broadcom is "still confident that this transaction will close and be completed in our fiscal 2023," which started in November.
"The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era. And we are confident that regulators will see this when they conclude their review," Tan said.
Broadcom CFO Kirsten Spears confirmed the company's revenue reached $8.9 billion for Q4, up 21 percent over the same period last year. Nearly 80 percent of this was accounted for by Broadcom's semiconductor solutions business, at $7.1 billion, which was up 26 percent on last year. Revenue for the infrastructure software division stood at $1.8 billion, up 4 percent year-on-year.
Broadcom said revenue in the fiscal first quarter would be about $8.9 billion, compared with an average analyst estimate of $8.8 billion, but declined to give full-year guidance for fiscal 2023, citing economic conditions. ®
Get our [17]Tech Resources
[1] https://www.reuters.com/markets/deals/broadcom-faces-eu-antitrust-probe-into-61-bln-vmware-deal-sources-2022-12-09/
[2] https://www.theregister.com/2022/11/16/broadcom_looks_for_eu_approval/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Y5deM8f7eY9qQSf0EZA2sgAAAIo&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://www.theregister.com/2022/10/17/broadcom_vmware_cloud_eu/
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y5deM8f7eY9qQSf0EZA2sgAAAIo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y5deM8f7eY9qQSf0EZA2sgAAAIo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2022/05/26/broadcom_vmware_merger/
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y5deM8f7eY9qQSf0EZA2sgAAAIo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2022/11/22/competition_and_markets_authority_vmware_broadcom/
[10] https://www.theregister.com/2022/12/01/vmware_broadcom_prices_nutanix_q123/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/virtualization&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y5deM8f7eY9qQSf0EZA2sgAAAIo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[12] https://www.fool.com/earnings/call-transcripts/2022/12/09/broadcom-avgo-q4-2022-earnings-call-transcript/
[13] https://www.theregister.com/2022/12/07/cloud_customers_overprovision/
[14] https://www.theregister.com/2022/12/01/vmware_broadcom_prices_nutanix_q123/
[15] https://www.theregister.com/2022/11/21/vmware_workstation_fusion_updates/
[16] https://www.theregister.com/2022/11/08/vmware_explore_europe_sovereign_saas/
[17] https://whitepapers.theregister.com/
Correction
Anonymous Coward
"The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era. crazy bags full of money."
FTFY
Care
If these organisations like CMA really cared about the market and consumers, then they would lobby the government for making such mergers outright illegal (so it would saved tax payer money - no more silly investigations and room for potential under the table deals).
Furthermore they would lobby government to create laws ordering giants like Amazon or Google to split and even split subsidiaries like AWS.
These consolidations are edge cases of capitalism that have not been regulated. They create market distortions and exploitation.
Organisations like CMA are just a cheap plaster and symptom of poor / lack of regulation.