UPDATED 13:25 EDT / JULY 19 2023

POLICY

Broadcom’s $61B VMware acquisition wins provisional approval in the UK

The U.K.’s top antitrust regulator has provisionally approved Broadcom Inc.’s $61 billion acquisition of VMware Inc., which has been the subject of a competition review since last year. 

The Competition and Markets Authority, or CMA, announced the move today. Members of the public may submit comments about the regulator’s decision until Aug. 9. Afterwards, CMA officials will review the submitted feedback and issue a final decision. 

The CMA began looking into the transaction last November, about six months after Broadcom signed the acquisition agreement with VMware. The regulator opened a formal investigation this January. CMA officials were worried that Broadcom could use VMware’s assets to gain an unfair edge over rivals.

The CMA’s concerns centered on what the regulator defines as the I/O hardware market. That market encompasses four product categories: Ethernet network interface cards, Fibre Channel switches, Fibre Channel host bus adapters and storage adapters. Such components are used to connect data center systems such as servers with one another.

Broadcom is a major supplier of I/O hardware. The CMA was concerned that the company might limit rivals’ ability to make their competing I/O hardware products compatible with VMware software. Because VMware’s software is ubiquitous in enterprise data centers, such a move on Broadcom’s part could reduce the appeal of rivals’ products.

As part of its investigation, the CMA determined that Broadcom could theoretically take such a step. But according to the regulator, the company has no incentive to do so in practice. The reason is that undermining the compatibility of rival I/O hardware products with VMware’s software would likely cause it to lose customers. 

“It is likely that a sufficient number of VMware customers would move workloads away from VMware,” the CMA stated today. “This strategy would be unprofitable for the Merged Entity.”

The other focus of the antitrust probe was VMware’s hardware certification process. To prove that their I/O hardware products work well with VMware’s technology, chipmakers must obtain a certification from the software maker. The process requires chipmakers to share technical data about their products with the company.

The CMA was worried that Broadcom might misuse the technical data its rivals share with VMware. During its investigation, however, the regulator determined that much of the information in question is either publicly available or already available to Broadcom. In other cases, the CMA found, the product data companies share with VMware doesn’t describe cutting-edge technology and therefore doesn’t have significant competition ramifications.

The authority’s decision to provisionally sign off on the deal comes a week after the European Union gave its green light. To close the acquisition, Broadcom will also have to win regulatory approval in the U.S.

Image: Broadcom

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