The European Commission (EC) has formally approved Broadcom’s $61 billion bid for virtualization software giant VMware, with the caveat that Broadcom fulfills certain ongoing commitments around access and interoperability.
The megabucks deal, which sits among the biggest tech acquisitions of all time, was always likely to attract regulatory scrutiny when it was announced way back in May last year. Europe revealed plans for an in-depth probe in December citing competition concerns, while the U.K. followed suit in March.
The Federal Trade Commission (FTC) in the U.S., meanwhile, is also currently investigating the deal.
Diversification
Broadcom’s interest in VMware stems from a push to diversify beyond hardware through extending deeper into enterprise infrastructure software. The EC’s core concern was that through buying VMware, which provides virtualization software that works with hardware such as fiber channel host-bus adapters, storage adapters and network interface cards (which Broadcom provides) could restrict competition in the hardware markets in which Broadcom currently operates.
Put simply, the EC was worried that Broadcom could restrict or “degrade” interoperability between VMware’s software and Broadcom’s hardware rivals such as Marvell, which develops similar fiber channel host-bus adapters to Broadcom.
Thus, the EC has made this one of the conditions for approving the deal — Broadcom must provide guaranteed access and interoperability relating to the “APIs, materials, tools, and technical support” that allow rival hardware companies (i.e. Marvell) to leverage VMware’s virtualization software. And on the same terms as Broadcom does.
The commitment applies for the next 10 years and exists under direct supervision of the European Commission, with an “independent trustee” appointed to monitor the commitment.
That Europe has approved the deal could be a harbinger of what’s to come elsewhere, though that is far from certain as we’ve seen with other recent regulatory probes. Most notable, perhaps, is Microsoft’s billion-dollar Activision deal, which was blocked in the U.K., approved in Europe and more or less given the go-ahead in the U.S. yesterday after a judge ruled that the FTC couldn’t block the deal.
So while the Broadcom and VMware deal isn’t over the line yet, today’s news is one step closer toward that end.
Comment