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January 31, 2024

Dell VMware deal terminated following the latter’s takeover by Broadcom

The decision to end the Dell VMware deal comes after a mixed response among customers to Broadcom's subscription licensing model push.

By Greg Noone

Dell Technologies is terminating its distribution agreement with VMware, a US regulatory filing has revealed. That deal had seen Dell agree to distribute the cloud computing software provider’s products and services, as part of a wider agreement between the two companies after VMware was spun off from Dell in 2021. However, VMware’s takeover by Broadcom late last year has now been cited by Dell as a reason why it has now chosen to withdraw from the partnership. 

“The Agreement provides a framework for various commercial activities between the two parties, including how [Dell Technologies] will act as a distributor of VMware products and services,” read the filing. However, the deal “provides that upon a Change of Control of either party (as defined in the Agreement), the other party may terminate the Agreement upon 60 days’ written notice.”

An image of the VMware logo on a smartphone, used to illustrate the termination of the  Dell VMware deal that saw the former distribute the latter's products and services.
Dell is ending a distribution deal with VMware. The termination of the Dell VMware deal comes months after the latter’s takeover by semiconductor manufacturer Broadcom. (Photo by T. Schneider / Shutterstock)

Dell VMware deal termination latest ripple from Broadcom takeover

Broadcom acquired VMware for $69bn in November 2023, after 18 months of regulatory scrutiny and an empty threat to block the deal by China’s competition watchdog. The semiconductor and infrastructure software provider subsequently announced that VMware would end its practice of selling perpetual software licenses and shift toward a subscription framework for its products and services. Additionally, support and subscription renewals for perpetual licenses would no longer be offered. 

“Over the past two years, VMware has been on a journey to simplify its portfolio and transition to a subscription model – the industry standard for cloud consumption,” said the senior vice-president and general manager for VMware’s Cloud Foundation Division, Krish Prasad, adding that the list price of VMware Cloud Foundation would be slashed by half as an inducement to switch to the new payment model. 

Glum reception to VMware changes from CIOs

These changes have not proven universally popular among VMware’s clientele. In a recent roundtable of CIOs convened by Constellation Research, many in attendance said price increases resulting from VMware’s shift to a subscription-based pricing structure had led them to consider adopting services from rival companies, or even consider open-source solutions. 

The extent to which Dell’s decision to terminate its distribution agreement with VMware is based on this grumbling remains unknown. The former’s owner, Michael Dell, was a major beneficiary of VMware’s takeover by Broadcom, sharing $14bn in cash with investment firm Silver Lake from the sale according to the Financial Times. A statement from Dell provided to The Register said that Broadcom continues to be an “important and valued partner for Dell Technologies. We will continue to evolve our relationship with Broadcom to deliver value to our business and our customers and partners.”

Read more: VMware patches critical vulnerability in Aria Automation

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