The businesses announced on Thursday that Broadcom will buy VMware for $61 billion in cash and shares, depending on the closing price of Broadcom common stock on May 25, 2022.
After Microsoft’s pending $69 billion takeover of Activision Blizzard and Dell’s $67 billion purchase of EMC in 2016, this would be one of the greatest technology transactions of all time.
Broadcom’s stock increased by as much as 2% in early Thursday trading, while VMWare’s price increased by more than 1%.
Broadcom’s acquisition of VMware will enable it to expand away from the core operation of creating and selling semiconductors and into corporate software, which offers higher profits. Enterprises utilize VMware’s technology to run both their own servers and cloud servers more efficiently.
Broadcom has been the most acquisitive semiconductor business in recent years, relying on strategic deals to fuel its expansion. CA Technologies for $18.9 billion in 2018 and Symantec for $10.7 billion in 2019 were its prior acquisitions.
Broadcom, on the other hand, had not completed a significant acquisition since 2019. Broadcom CEO Hock Tan stated in March that the company had “capability to undertake a good-sized acquisition.”
Broadcom sought to buy Qualcomm for $117 billion in 2018, but the deal was thwarted by then-President Donald Trump, who claimed national security concerns as a reason.
Late last year, VMware split apart from Dell in order to pay off debt. Dell purchased the company in 2016 when it purchased EMC. About 40% of VMware is owned by Michael Dell, the CEO and founder of Dell.
Expectations for earnings are exceeded
Broadcom also announced second-quarter results on Thursday, which were better than expected on both the top and bottom lines, as well as bullish third-quarter forecasts.
According to analysts polled by Refinitiv, Broadcom earned $9.07 per share in the second quarter, far exceeding average projections of $8.70 per share. According to Refinitiv, revenue increased by 23% year over year to $8.1 billion, exceeding the $7.9 billion forecast by Wall Street.
The corporation provided a revenue forecast for the current quarter that exceeded expectations, predicting sales of $8.4 billion. Refinitiv polled analysts, who predicted revenue of slightly over $8 billion.
In a statement, Tan said the company’s networking and server storage divisions performed well in the second quarter. He went on to say, “We expect this momentum to continue into the third quarter.”
