EU probes Broadcom/VMware deal over impact on hardware, not price hikes or cloudy concerns

+COMMENT The European Commission has opened what it describes arsenic an “an in-depth investigation” into Broadcom’s acquisition of VMware.

The logic fixed for nan probe is: “The transaction would let Broadcom to restrict title successful nan marketplace for definite hardware components which interoperate pinch VMware's software.”

The Commission’s (EC’s) little announcement of its probe notes that Broadcom makes Network Interface Cards, Fiber Channel Host-Bus Adapters, and retention adapters, and that VMware’s products are compatible pinch specified products from galore vendors.

Here’s nan Commission’s connection of title concerns:

The Commission besides plans to see whether Broadcom would do things to harm nan improvement of SmartNICs by rival vendors. VMware has made nan accelerators nan centerpiece of vSphere 8, promoting they tin grip networking and information chores that inhabit up to 20 percent of a server’s CPU cores.

Another interest is that Broadcom could bundle VMware’s products pinch its ain mainframe and information wares, “and nary longer connection VMware's virtualisation package arsenic a stand-alone merchandise reducing prime and perchance foreclosing rival package providers.”

Analysis

The EC appears to ideate a world successful which each NIC, HBA and retention adapter vendors different than Broadcom are banished from VMware’s hardware compatibility list. Or possibly a world successful which VMware’s reference architectures disregard suppliers different than Broadcom.

Which conscionable isn’t really VMware operates.

“VMware's occurrence complete nan past 2 decades has been predicated connected hardware compatibility,” Gartner vice-president expert Michael Warrilow told The Register. “If Broadcom were to deviate from that they would suffer nan wrath of each awesome and insignificant server and retention hardware vendor successful nan industry. It would beryllium commercialized termination and would obliviate nan business lawsuit for nan acquisition.”

I deliberation he’s right. If Broadcom does nan things nan EC worries about, it deserves to person nan book thrown astatine it by regulators and VMware customers alike.

VMware has agelong positioned itself arsenic a neutral subordinate and during its clip nether nan ownership of EMC and Dell many times demonstrated it tin run successful bully religion to nourish its owners’ rivals.

The institution has consistently worked to make its wares activity pinch immoderate server, storage, NIC, HBA, GPU and CPU vendor. It does truthful because while VMware dominates nan server virtualization market, rivals specified arsenic Microsoft, Nutanix, and unfastened root projects each connection beardown alternatives to nan vStack. Restricting personification prime for hardware would truthful beryllium an enactment of self-harm.

The conception that Broadcom would alteration VMware’s ethos and make only its ain kit compatible – aliases optimally interoperable - is truthful far-fetched because Broadcom tin surely spot that imposing that determination connected VMware customers would irritate them immensely.

And for what? Even a cardinal other NIC and HBA income a twelvemonth will not beryllium nan triumph that makes nan $61 cardinal acquisition of VMware a success.

Broadcom CEO Hock Tan is excessively knowledgeable to messiness up VMware for nan mini prize of trading much NICs. He’s besides excessively knowledgeable not to cognize that customers want and request choice: Broadcom does not person a NIC aliases HBA for each occasion, and customers will sometimes want and request to see rivals.

Oh and a small point called COVID-19 has shown nan world nan folly of going all-in pinch a azygous supplier. As geopolitical conflict roils, would Broadcom really shackle VMware customers to a azygous proviso chain?

• VMware adds subscription type of basal vSphere for server consolidation
• Broadcom tries to quash VMware value emergence rumors arsenic CEO promises they won't
• UK authorities unfastened preliminary probe into Broadcom's VMware acquisition
• Broadcom to rotation VMware takeover arsenic creating 'more competition' successful cloud

The EC’s concerns that only trading VMware products successful bundles is much worthy because VMware – for illustration galore endeavor package vendors – packs its licenses pinch requirements to bargain much worldly and/or summation walk complete time. It’s conceivable that immoderate Symantec aliases CA wares could beryllium bundled pinch VMware products, and nan resulting packages would see immoderate classes of package customers could get from rival vendors.

Or VMware customers could conscionable suck it up and strengthen immoderate shelfware. They would not beryllium nan first to do so.

I expect that Broadcom will beryllium rather relieved by nan EC’s perspective connected its probe. The institution has ne'er stated that acquiring VMware is astir nourishing its hardware business, alternatively suggesting it wants to diversify to go a supplier of much of an organisation’s wide needs.

The EC probe truthful misses nan unrecorded issues regarding nan deal.

Broadcom has precocious repeatedly stated that it will not summation prices for VMware products. It needs to do truthful because Broadcom’s past package acquisitions did spot it hike fees. Yet nan EC is silent connected that concern.

It’s besides silent connected jobs, which are judge to go.

The probe besides does not evidently see nan future. I’ve antecedently argued that nan Broadcom/VMware operation could make for a mighty integrated IoT stack. Perhaps nan Commission tin get Broadcom to work together to a far-reaching voluntary prohibition connected exclusionary bundling that stops specified a stack from being non-competitive.

Or possibly it will attraction connected NICs and fibre channel, which will forestall Broadcom indulging successful self-sabotage successful those mostly settled markets.

The EC has group a deadline of May 11th, 2023, to make a determination connected whether to let nan woody to proceed. The attraction connected hardware, I believe, intends Broadcom will make concessions that don’t wounded it a spot successful bid to get nan woody done.

And meantime Broadcom gets to benignant retired nan UK’s and USA’s probes into nan acquisition. ®