Broadcom-VMware Deal Approved In Canada, Brazil, South Africa: CEO
The U.S. Federal Trade Commission is five-months into its investigation, while the European Commission is still mulling what, if any, action to take on the proposed $61 billion transaction.
Broadcom’s potential $61 billion takeover of VMware was given the thumbs up by government regulators in Brazil, Canada, and South Africa, Broadcom CEO Hock Tan told investors during the company’s earnings call Thursday.
However authorities in the U.S. and E.U. have yet to weigh in.
“We anticipated the timeline of the review process would be more extended in other key regions, especially considering the size of this transaction,” Tan said. “Having said that. We are still confident that this transaction will close and be completed in fiscal 2023. The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era and we are confident that regulators will see this when they conclude their review.”
Tan’s optimism that a deal will be approved in the U.S. is tempered by the five months that the Federal Trade Commission has so far spent investigating whether it will approve or oppose the deal. In Europe, regulators at the European Commission have said they may have a decision as soon as Dec. 20.
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Broadcom’s fourth quarter earnings of $8.93 billion were up 21-percent from a year ago. Net income came in at $3.35 billion with earnings per share at $7.83. Broadcom expects to see more growth in its first quarter targeting revenue to land at $8.9 billion an increase of 16-percent.
For its fiscal year, Broadcom’s sales reached a record high of $33.2 billion, which Tan said came on the back of higher demand from hyperscalers. Analysts questioned Tan about how Broadcom achieved strong results among its server and storage business, while some competitors’ earnings have weakened from market pressures. Tan said many of the company’s newest products are entire sub-systems contained on circuit boards.
“We’re not just shipping chips, so that counts for a big part of the growth. Notwithstanding, unit growth is up … It’s not everything that grows. But enough is there that overall it grows,” he said.
Additionally, Broadcom said it has orders fully booked through next year. When pressed on whether Broadcom is concerned that in a weaker economic environment, its customers may try to “adjust” those orders, Tan laughed.
“What if we all see a massive recession or depression in the next six months, nine months and things really collapse around our ears, what will we do?” Tan asked. “My answer is, I don’t know. Which is why we don’t give you annual guidance. We will react if and when circumstances require us to.”
On Tuesday, Tan published an open letter to the VMware user community saying Broadcom’s first priorities will be partnerships before it looks to invest in R&D.
“Our investment philosophy is about creating technology and products that provide clear value to customers, as well as improving their usability and delivery – R&D is critical to this effort,” Tan wrote. “So, while we will look for opportunities post-close to further unlock VMware’s potential, our initial focus will be to continue building on the pioneering work and partnerships that define VMware today.”
In addition, Tan said he wants to make VMware easier for customers to access, and to do so he plans to invest “greater resources” into training and certificate programs.
The statements are the first indication of what could be Broadcom’s starting moves with VMware should the $61 billion mega deal pass muster with regulators. Since the possible takeover was announced in May, VMware partners and users have expressed concern about the company’s history of innovation dying with the deal.