Broadcom has learnt 'value' of channel and is ready to 'embrace' it after VMware takeover
Broadcom Software Group’s president says the company wants to 'continue to support' the channel
Broadcom Software Group's president has said the company is ready to "embrace" the channel following its recent $61bn takeover of VMware.
Tom Krause says the chipmaker giant has learnt the channel's "value" from previous acquisitions, with the company wanting to "continue to support" it going forward following its latest purchase.
Broadcom acquired CA Technologies and Symantec in 2018 and 2019 respectively, although its deal with Symantec sparked some concern from the channel.
At the time, partners expressed fears over rumours that Broadcom planned to take Symantec's top 1,500 customers direct, while disties told sister publication Channel Partner Insight that they were concerned over Broadcom's silence over its channel strategy after buying Symantec.
"We see a very valuable channel, I think there's some things we have learned relative to the CA and Symantec acquisitions in terms of the value of the channel," Krause said on a call with analysts.
"We want to continue to support that channel. That's going to allow us to support a lot more revenues in a cost effective way. So we see a real opportunity to leverage that."
As part of the deal for the company to acquire VMware, the Broadcom Software Group will rebrand and operate as VMware, incorporating Broadcom's existing infrastructure and security software solutions as part of an expanded VMware portfolio.
Krause said the agreement presents "an opportunity to embrace the channel" as he outlined Broadcom's strategy for it going forward.
He said: "The fact that we can leverage the combined go-to-market engine at that scale gives us huge economies.
"I think what we are going to be able to do is marry effectively a direct sales force, which covers the largest couple thousand customers, with a very significant channel partner arrangement.
"There's an opportunity to embrace the channel. The two-tier distribution model, with distribution partners and key, value-added resellers.
"When I look at that in its totality, what we can't do today, we can definitely take advantage of with the newfound scale between the two companies."
The deal will see VMware shareholders elect to receive either $142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share.
The shareholder election will be subject to proration, resulting in approximately 50 per cent of VMware's shares being exchanged for cash consideration and 50 per cent being exchanged for Broadcom common stock.
Meanwhile, Broadcom will acquire all of the outstanding shares of VMware in a cash-and-stock transaction that values VMware at approximately $61bn.
The chipmaker will also assume $8bn of VMware net debt.
The transaction, which is expected to be completed in Broadcom's fiscal year 2023, is subject to the receipt of regulatory approvals and other customary closing conditions, including approval by VMware shareholders.
Prior to the deal being confirmed, Wanstor CTO Richard Kuczma felt the company looking to acquire VMware was "bad news" for VMware customers, believing that there could be "less investment in R&D going forward".
Bola Rotibi, director of software development at CCS Insight, feels the deal must see Broadcom "prove that it can integrate a silicon, software and services story".
Rotibi added: "Where other semiconductor companies have invested significantly in R&D to diversify, Broadcom is favouring a short cut to success through acquisition. Whilst this will accelerate Broadcom's software portfolio build out, its traditionally short term perspective and aversion to long term R&D raises significant question marks given the complexity of a silicon and services play".
"Above all, enterprise customers value predictability, consistency and a commitment to a development roadmap. Broadcom's move will raise significant question marks for customers and will require careful management by all sides if this is to be a success".