Broadcom has just days to craft an argument that can calm government regulators who fear the San Jose, Calif. semi-conductor giant may use its control of VMware to harm rivals and the market.
The U.K.’s Competition and Market Authority (CMA) has given Broadcom until May 9 to file a written response to its nine-page “Issues Statement” that mapped out the reasons why it is concerned about the $61 billion buyout.
“The Merged Entity would be able to leverage VMware’s market power in server virtualization software to reduce the competitiveness of Broadcom’s hardware rivals by, for example, impairing the certification of competitors’ drivers for Ethernet NICs, FC [Fibre Chanel] HBAs, and storage adapters, and impairing access to VMware’s API for competitors’ FC switches,” regulators there wrote on April 21.
“The effect on competition could be substantial given that the relevant hardware markets are already relatively concentrated and interoperability with VMware’s server virtualization software is very important to server hardware manufacturers.”
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As Broadcom races to respond to the UK, the clock is also ticking on an internal deadline: the May 26 outside date. That’s the date where VMware could be allowed out of the deal, unless its leaders or Broadcom’s shift that date to later in the year. In February, both sides agreed to do just that, and pushed the outside date back 90 days. While either side can extend that marker, the deadline is less than a month away.
While partners have frequently told CRN they are excited at some of the prospects the deal could bring and are following along as it progresses, their customers do not seem to care who owns VMware as long as it delivers the outcomes they need.
“The one thing we’ve noticed among our customer base is that they don’t necessarily care where VMware ultimately ends up,” said Gary McConnell, CEO of VirtuIT Systems, a New York-based solution provider with a VMware Master Services Competency. “The technology is solid as is the leadership, so it’s been business as usual in that regard.”
However, the U.K. CMA is not the only regulatory board that has worries about the sale.
The European Commission, the competition watchdog for the European Union, is also sounding the alarm on the merger following a monthslong investigation that began in December and included a look at Broadcom’s internal documents.
On April 12, the commission said it feared Broadcom could use the newly acquired technology from VMware to turn off competitors’ access to it, which may “in turn lead to higher prices, lower quality and less innovation for business customers and ultimately consumers.”
“The Commission is concerned that Broadcom may restrict competition in the global markets for the supply of FC HBAs and storage adapters by foreclosing competitors’ hardware by delaying or degrading their access to VMware’s server virtualization software,” the commission wrote in an April 4 filing.
Meanwhile in the U.S., the Federal Trade Commission told CRN it is still not commenting on what is now a 10-month-long in-depth investigation of the acquisition.
Broadcom has repeatedly said it expects a merger the size of the one it has proposed with VMware could take longer to close. When it announced the sale on May 26, 2022, Broadcom said it expected to close within this fiscal year, which ends in October.
The deal has cleared regulators in Canada, Brazil and South Africa, but it is still awaiting clearance in China.
Here is a rundown of where the it stands with regulators around the world, as well as what Broadcom and corporate leaders say.
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O’Ryan Johnson is a veteran news reporter. He covers the data center beat for CRN and hopes to hear from channel partners about how he can improve his coverage and write the stories they want to read. He can be reached at [email protected]..
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