Broadcom is in talks to buy cloud software provider VMware, sources say

Broadcom is in talks to buy cloud software provider VMware, according to industry insiders who spoke to both Bloomberg and Reuters. Terms were not reported and the sources said a deal is not imminent.

Neither company responded to requests by Fierce Electronics for comment.

Broadcom’s previous acquisitions show it is already moving away from chipmaking and towards enterprise software, and a VMware deal would solidify that direction. The company bought CA Technology for nearly $19 billion and Symantec security division for $10.7 billion in the past four years.

Shares of VMware jumped 21% prior to market openings on Monday reaching $116.49 per share, while Broadcom shares declined 4% reaching $520.

VMWare’s market capitalization is $40.3 billion, while it had $11 billion in 2021 revenues and 34,000 employees. Broadcom’s market capitalization is more than $220 billion, with revenues in 2021 of $27 billion and 20,000 employees. Broadcom’s next earnings call is June 2.

Michael Dell is VMware’s biggest investor with a 40% stake. Dell Technologies spun out VMWare to investors in 2021.

Several tech industry analysts said on Twitter the deal could be likely because Broadcom has relied on its acquisitions to grow. Broadcom “needs acquisitions to feed the roll up,” tweeted Patrick Moorhead, an analyst at Moor Insights and Strategy.

Based on Broadcom’s prior acquisitions, the company has gutted R&D and operating expenses, Moorhead added, while raising prices and increasing executive compensation. “Maybe this one is different.”

Other industry insiders speculated that Intel and AMD might be in the hunt to buy VMWare as well.