As per people familiar with the matter, Broadcom Inc. is talking with VMware Inc. for an acquisition. The merger of the cloud computing company with the chipmaker would be a blockbuster deal, catapulting them into a highly specialized software business.
More about the possible acquisition
The ongoing discussion does not guarantee the deal may finalize as per people who did not wish to be denied as the matter is not public. The current market value of VMware is $40 billion, and the deal at a premium would mean a higher purchase price.
The transaction can extend the acquisition spree of Broadcom’s CEO, Hock Tan, who has built one of the most diversified and large companies in the chip industry. Broadcom has bought CA Technologies in 2018 and the enterprise security business of Symantec Corp in 2019, underlying the key focus on software.
Comments were not available from the representatives of VMware and Broadcom.
Broadcom produces a wide range of electronic items, with the products finding use in everything from industrial equipment to iPhone. However, data centers have become a source of growth, and expanding on software allows companies to target the market better.
Last year Broadcom was in talks with SAS Institute Inc., a software company valued between $15 billion and $20 billion and closely held. The deal, however, did not materialize.
Tan was thwarted in his attempt for the biggest takeover deal when he tried to bid for rival Qualcomm Inc. in 2018 after meeting with resistance from the Trump administration. The concern then was that Broadcom was based in Singapore, but the company had shifted its headquarters to the US. It is based in San Jose, California, about 20 miles away from VMware’s Palo Alto headquarters.
VMware was founded in 1998 as a pioneer in Silicon Valley. It is known for inventing virtual software which consolidates workloads and applications. It struggled to keep up the growth and carve out a niche as it moved to the cloud. The company entered into a partnership with Amazon Inc., one of the biggest cloud storage service providers.
In 2004, VMware was acquired by EMC Corp, the storage technology giant. The company sold a part of its stake through an IPO three years later, and later the business went over to Dell Technologies Inc. when EMC was acquired in 2016. Last year VMware was spun off from Dell.
As per data compiled by Bloomberg, Michael Dell and PE firm silver lake remain top Investors in VMware.
Shares of VMware and Broadcom have both declined roughly 18% this year, hurt by the broader market rout. However, they are not as hard-hit as many other tech stocks. The Semiconductor Index on Philadelphia Stock Exchange is down 27% this year.
VMware rose to $95.71 in New York trading Friday, up by 0.8%, makings its market valuation to $40,3 billion. Broadcom Inc. was down 1% to $543.19, having a market capitalization of $222 billion.
You can decide to invest in any of these three semiconductor stocks. Your chance of making a profit will certainly be higher, to say the least.
