UK competition regulator the Competition and Markets Authority (CMA) has given the provisional green light to chipmaker Broadcom’s $61bn takeover of virtualisation specialist VMware. The deal was given provisional approval in the EU last week, and could be completed before the end of the year.
The deal “would not substantially reduce competition in the supply of server hardware components in the UK”, a CMA notice published today says.
Broadcom announced its intention to purchase VMware last May, but has faced investigations from regulators around the world following opposition from other tech companies and VMware customers, which have raised concerns they may be forced to purchase Broadcom products if the acquisition is completed.
CMA explains why it thinks the Broadcom-VMware takeover can go ahead
But the CMA said it looked into these worries, and came to the conclusion it would not be beneficial for Broadcom to make VMware’s software less compatible with hardware from other manufacturers.
A CMA panel also considered whether the deal could harm innovation, and if Broadcom’s rivals would need to share commercially sensitive information with VMware to ensure their hardware was compatible with the company’s software, thus potentially giving Broadcom access to this valuable data.
But the CMA concluded that “the deal would be unlikely to harm innovation, in particular since information about new product adaptations only needs to be shared with VMware at a stage when it is too late to be of commercial benefit to Broadcom.”
Richard Feasey, chair of the independent inquiry panel carrying out the investigation, said: “Computer servers – often using the products of Broadcom and VMware – play a critical role in enabling us to work in the office or at home or to access TV shows or use banking services.
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“That’s why it’s important we investigate this deal to ensure that UK businesses continue to benefit from competition and innovation in the supply of server components. After carefully considering a broad range of evidence, we have provisionally found that this deal would not harm competition.”
The CMA will now undertake further consultation before confirming its final decision. Interested parties have until 9 August to submit comments.
Why Broadcom is buying VMware
The blockbuster is thought to be an attempt from Broadcom to diversify its portfolio. With more than 500,000 customers and annual revenue of $13.35bn, it would deliver a considerable boost to the chipmaker’s bottom line. It is expected Broadcom will accelerate VMware’s move to a service model, away from traditional software licensing, should the takeover go through.
Regulators have been queuing up to look at whether the deal would have a negative impact on customers, and last week’s decision by the EU to approve the acquisition was a major step forward. To satisfy the demands of Brussels, Broadcom had to make guarantees of interoperability for VMware software with chips from rival businesses such as Marvell Technologies.
After the EU decision was announced last week, a Broadcom spokesperson said the company “looks forward to continuing to work constructively with regulators around the world.”
They added: “Broadcom is confident that when regulators conclude their review, they too will see that the combination of Broadcom and VMware will enhance competition in the cloud and benefit enterprise customers by giving them more choice and control over where they locate their workloads.”
It still expects that the transaction will close in its fiscal year 2023, but will first need to win regulatory approval in the US, where an investigation is ongoing.
