Broadcom’s plans to purchase VMware are causing a range of reactions among outside experts and insiders, with no one knowing what to expect.
Broadcom announced in late May that it had reached a deal to acquire virtualization company VMware for $61 billion. The deal was announced just months after VMware was spun off from Dell, becoming an independent company once again. The deal is also very much in line with Broadcom’s pattern of using acquisitions to rapidly expand its business.
With the third-largest tech deal in history moving forward, opinions are all over the map regarding what to expect from the deal, although most agree on one point: Broadcom will aggressively push VMware to boost its margins and profitability.
According to SiliconAngle’s Dave Vellante, Broadcom’s growth far outpaces VMware’s, 20% per year versus 3%. Similarly, Broadcom’s operating margin is 61%, far above VMware’s 25%. Even Oracle, a consistently highly profitable, only comes in at 47%.
Vellante says Broadcom has a very simple approach, requiring business unit leaders to agree to milestones, goals, and financial targets. As long as those are met, everything runs smoothly. If the goals aren’t met, the business leader is given four or five quarters to get on target; otherwise, the business is sold off or killed.
Broadcom’s approach doesn’t sound all bad to some. In fact, VMware User Group executive director Brad Tompkins posted a blog entitled: “Why the Broadcom announcement is good for you.”
“I don’t think this is the end of the world,” he said in an interview with SiliconANGLE. “I think everyone has kind of gotten over it and is ready for information about what it means to them.”
Not everyone shares Tompkins’ optimism, however. According to Business Insider, there’s a mass exodus from VMware as employees are disillusioned with the possibility of the deal going through.
“It’s like a sinking ship and we’re being asked to row until we go under,” one engineer said, estimating that half of his work acquaintances are looking for other jobs. “Do I hang out here and the boat’s probably going to sink? Or do I jump ship because other people are?”
“People feel betrayed,” one VMware engineer tells Insider. “For my team of 10 I know four of us are actively interviewing.” Another one said that “the only thing keeping many people here is the specter of a recession.”
One thing is certain: VMware’s future has a lot of question marks in it.