Posts here have this knowing tone of the deal falling apart. On the other hand, colleagues are not even entertaining the idea of this acquisition collapsing to the point they are making plans for ‘after we are acquired’ with no other possibilities up for consideration.
Who is delusional here? The conviction coming from both sides is baffling knowing there is an assumption of this outcome that will turn out to be completely wrong.
"I question how Hock Tan can manage Wall Street expectations that he'll turn around VMW (beyond cutting headcount costs)?"
It's a good question for VMW employees. After all the layers of senior and middle manager employees are cut, what is left? A disillusioned workforce with no future.
Broadcom Sofware is the place where good ideas go to die and spineless people retire.
This entire deal and other deals are orchestrated by politics.
Including the strategically timed sanction tightening.
The feds have their markings all over this from the deal sailing through without objection everywhere but China, to the miraculously timed puppet show of Gavin Newsom and Xi. It’s not over. But hock will have the last laugh.
I can make amends with getting pumped knowing Magoo and Betsy aren’t walking away with their golden parachutes.
This!
“The thing people seem to forget is "oh ok you don't go through with HT" great Michael Dell goes on a PE selling spree and still makes money and layoffs still happen.”
I can make amends with getting pumped knowing Magoo and Betsy aren’t walking away with their golden parachutes.
I hope this deal burns for that reason alone. #BandzAMakeHerDance
Re: Hocks “strategy” being universally applicable: BC is essentially a patent rental company. To misquote Han Solo, selling software aint exactly like contracting chip production, boy. The CA & Symantec purchases were legacy software where little changed over time and customers liked it that way. Chip buyers want a steady supply above all else. But when you’re selling what is essentially an operating system you have to meet or beat competitor’s features regularly to keep the license renewals coming. Nobody is going to buy vSphere for virus definition file updates. If something better/faster than FC comes along and ESX doesn’t support it, customers will move on to something else. Hocs delusion that VMWs customers are somehow “locked in” if he drops R&D and increases prices 1000% doesn’t reflect reality. Especially now that containers are a thing.
None of that is to say the VMW couldn’t use 20% reduction in headcount. Or that VMW is somehow special or unique. But software customers are in no way as “captive” as BCs chip-buying customers. If the deal goes through, I expect in a few years it will be studied as an example of a business overpaying for something it didn’t understand.
“I agree, what HT did with CA and Symantec doesn't qualify him to reboot VMW for what must come next. It's a much more complicated situation -- from a product and marketplace competition perspective.”
Now that’s funny. Too complex? The playbook is the same, nothing different or special about VMware. It’s legacy, over bloated and will be savagely trimmed down and
what happens next will be a repeat of what they did to CA and Symantec.
Most of us understand what plan B looks like, even if executive won’t articulate it. Many of us are prepared for this crusade
People say Qualcomm and Broadcom broke down do not understand Qualcomm was US based therefore the US had the final say.
Intel Tower could be similar sure.
Dell and Emc also didn't get China approval right away and just did business independently for a bit.
The thing people seem to forget is "oh ok you don't go through with HT" great Michael Dell goes on a PE selling spree and still makes money and layoffs still happen.
"Both parties could easily set up a new agreement, so there’s even this possibility."
After failing for 1.5 years and with nothing new how and why could they do that?
Both parties could easily set up a new agreement, so there’s even this possibility.
Given that it's only 24 days until the deal falls apart and they haven't managed to close it in a year and a half I'd say that those who still think that the deal will close are delusional.
Tom Krause went from being a padawan to a master, that’s all. He needs to build his own empire.
“I question how Hock Tan can manage Wall Street expectations that he'll turn around VMW (beyond cutting headcount costs)?”
But that in itself will provide significant financial benefits. VMware is heavily bloated, with way too many splinter and overlay groups across the business than many see zero value in, and would make zero difference to the revenue. How often do we look around and wonder what so many highly paid people are actually doing to help drive the business forward. So whether this acquisition happens or not, a 50% headcount reduction would probably bring significant value.
Tom Krause was the AVGO architect of turning around CA and Symantec once they were acquired by AVGO.
HT introduced Tom has the 'finance' expert he entrusted to manage the VMW acquisition.
Then shortly after being briefed on the current balance sheet by the VMW leadership team, Tom abruptly announced that he would leave AVGO. For me, that was a red flag.
Everyone saying China will use this aquisition as a bargaining chip for the negotiations between US and China is delusional. China will use it's power to operate in the best interest of the CCP / Xi. There's no way China will approve this deal as a gesture of good will. They will secure what they want from the US and get the AI chip ban lifted. Then and only then, may China approve the deal if it wants too. China has no need for any company to get their aquisition approved. They can play the long game for years and hold these aquisitions up as they see fit. If it's already not approved, its time to move on.
Greedy companies, however, do need China as they manufacture their goods from them and also depend on China as a substantial amount if their revenue. These international companies can decouple from Chinas manufactoring or it's consumer base, as much as the US can stop printing money.
Why should the US administration care if China blocks the deal? We are not that important in the geopolitical chess game.
If the EU or any other country where VMware/Broadcom does significant business blocked the acquisition, do you think the US government would be exerting huge pressure on those governments to change their mind? That feels far fetched.
Time will tell…as it always does.
I agree, what HT did with CA and Symantec doesn't qualify him to reboot VMW for what must come next. It's a much more complicated situation -- from a product and marketplace competition perspective.
Recent history tells me that HT is ill-prepared for this complex business transformation task. He can't simply use cost & expense reduction strategies. It requires more skill.
"Who is delusional here?"
A different question might help. Who believes that this acquisition process is 'normal' -- when compared to all the other tech sector acquisitions that were announced in 2022?
This deal exhibited abnormal issues early on in the process. Now with China inserting volatility into the final stage of the process, I'm reminded the "wishful thinking and hope are not strategies for successful negotiations."
How much mounting evidence do we need that it was a flawed assumption? Moreover, even if the deal can be pushed through, I question how Hock Tan can manage Wall Street expectations that he'll turn around VMW (beyond cutting headcount costs)?
Could it be that China is keeping Broadcom/VMware approval as a bargaining chip for the Xi/Biden meeting that will take place at the APEC conference in San Francisco in mid-November? If the USA doesn’t say or do anything else that negatively impacts China (the chip thing was pretty major!), Broadcom/VMware approval will probably be a goodwill gesture from Xi. If the USA doesn’t play nice, perhaps a not-so-positive result for Broadcom. Looks like it’s going to be a bumpy two weeks.
It's pretty clear if you look at history, it tends to ryhme. We have two very similar aquisitions that failed with Intel / Tower and Qualcomm / NXP. What did those two failed aquisitions look like? What steps did Qualcomm / Intel do, to work with China to overcome the regulatory approvals? What do Intel / Qualcomm and Broadcom all have in common? How are they different? What political factors, geopolitics are different, if any? What trend does China have with accepting US / international businesses to finish aquisitions? What can said company provide to China, knowing they manufacture most of those companies parts and equipment. Most have their chips made by TSMC
There's always a punchers chance this gets through, but it's more like a parley bet. Odds are low and success is unlikely. The only delusional ones are the ones that ignore history. Only you have control over yourself.
This deal will not go through. Nor will any aquisition of VMware without Chinas approval if said company operates in China, and most companies that could buy VMware, operate in China.
Yes what we know is that no one knows.
Anyone acting like they do should not be trusted including HT
Usually I hate the whole "both sides" thing, but I'm going to make an exception: anyone certain of the outcome is delusional. This all comes down to the state of mind of obscure Chinese bureaucrats and their leaders. The process is INTENTIONALLY opaque. Nobody can know except maybe Xi. And he could change his mind one way or the other.