Broadcom announces VMware purchase plans

Broadcom announced that it will acquire VMware for $ 61 billion worth of cash and stock transactions based on the closing price of Broadcom common stock on May 25, 2022.

The deal will be one of the largest technology acquisitions in history, with Microsoft buying Activision Blizzard for $ 69 billion in 2016 and Dell buying EMC for $ 67 billion.

Broadcom’s share price rose 3% early on Thursday, while VMware’s share price rose more than 2%.

Broadcom’s acquisition of VMware allows the company to diversify from its core semiconductor design and sales business to profitable enterprise software. VMware products are used by businesses to operate their servers and cloud servers more efficiently.

Broadcom is the most acquired semiconductor company and has used mergers strategically to drive growth in recent years. Previously, I bought CA Technologies for $ 18.9 billion in 2018 and Symantec for $ 10.7 billion in 2019.

However, Broadcom hasn’t made a major acquisition since 2019. In March, Broadcom CEO Hock Tan said the company “has the ability to make the right size acquisition.”

Broadcom planned to buy Qualcomm for $ 117 billion in 2018 before the deal was hampered by then-President Donald Trump, who cited national security concerns.

VMware spun off from Dell at the end of last year to pay off its debt. Dell first acquired the company when it acquired EMC in 2016. Michael Dell, the founder and CEO of Dell, owns about 40% of VMware.

Maximum expectations of earnings

Broadcom reported its second quarter results on Thursday, in addition to announcing the acquisition. This was above the top and bottom lines while providing bright guidance in the third quarter.

Broadcom posted a quarterly adjusted earnings of $ 9.07 per share, well above the consensus estimate of $ 8.70 per share, according to analysts surveyed by Refinitiv. Revenues were up 23% year-on-year to $ 8.1 billion, ahead of Wall Street’s forecast of $ 7.9 billion, according to Refinitiv.

The company’s earnings outlook for the quarter, which exceeded consensus estimates, led to sales of approximately $ 8.4 billion. Analysts surveyed by Refinitiv expected revenues of just over $ 8 billion.

Tan said in a statement that Broadcom focused on networking and server storage units in the second quarter. “We expect this momentum to continue into the third quarter,” he added.

— CNBC’s Annie Palmer contributed to this report. Broadcom announces VMware purchase plans

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