Broadcom will acquire VMware for $61 billion in cash and stock, based on the closing price of Broadcom common stock on May 25, 2022, the companies announced Thursday.
The deal would be one of the largest technology acquisitions ever, following Microsoft’s pending $69 billion acquisition of Activision Blizzard and Dell’s $67 billion acquisition of EMC in 2016.
Broadcom shares fell nearly 1% in premarket trading, while VMWare shares rose 1.2%.
Broadcom’s acquisition of VMware will help the company move from its core business of designing and selling semiconductors to enterprise software for greater profits. Companies use VMware’s products to run their own servers and cloud servers more efficiently.
Broadcom is the most acquiring semiconductor company, using mergers strategically in recent years to fuel its growth. It previously acquired CA Technologies in 2018 for $18.9 billion and Symantec in 2019 for $10.7 billion.
But Broadcom has not made a major acquisition since 2019. In March, Broadcom Chief Executive Hock Tan said the company had “the ability to make large acquisitions.”
Broadcom planned to buy Qualcomm for $117 billion in 2018, but then-President Donald Trump blocked the deal, citing national security concerns.
To pay down its debt, VMware spun off from Dell late last year. Dell originally acquired the company when it bought EMC in 2016. Dell CEO and founder Michael Dell owns about 40% of VMware.
Results exceeded expectations
In addition to announcing the acquisition, Broadcom reported second-quarter results on Thursday, which were mixed, while providing upbeat guidance for the third quarter.
Broadcom reported second-quarter adjusted earnings of $9.07 a share, well above consensus estimates of $8.70 a share, according to analysts polled by Refinitiv. Revenue rose 23% year over year to $8.1 billion, beating Wall Street expectations of $7.9 billion, according to Refinitiv data.
The company provided revenue guidance for the quarter that beat consensus estimates, targeting revenue of about $8.4 billion. Analysts polled by Refinitiv expected revenue of just over $8 billion.
The company saw strength in its networking and server storage divisions in the second quarter, Tan said in a statement. “We expect this momentum to continue in the third quarter,” he added.
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