European Union investigates Broadcom’s $61 billion acquisition of VMware

The European Union’s Investigation of Broadcom’s Bid for VMware

The European Union is poised to conduct a thorough investigation into Broadcom’s $61 billion offer to acquire VMware. Following an initial probe, the European Commission announced on Tuesday its concerns that the proposed merger could potentially restrict competition in the markets for network interface cards, fiber channel host-bus adapters, and storage adapters.

EU Concerns

The EU’s main worry is that Broadcom could limit interoperability between competitor hardware and VMware’s server virtualization software, potentially hindering competition in these markets. There are also concerns that the company might impede or degrade access to VMware’s software, leading to higher prices, lower quality, and reduced innovation for both business customers and consumers.

Potential Impacts

The Commission will also investigate whether Broadcom could obstruct competitors such as NVIDIA and Intel from developing their own smart network interface cards. The potential impact of VMware’s involvement in Project Monterey, an industry-wide initiative announced in 2020, is cited as a possible point of contention. There is fear that Broadcom could restrict VMware’s participation in Project Monterey to protect its NIC revenues, thus stifling innovation to the detriment of customers. Another concern is that Broadcom could bundle VMware’s virtualization software with its own mainframe and security tools, limiting market choice.

Outcome of the Investigation

Broadcom’s bid to acquire VMware, one of the significant tech acquisitions of 2022, was expected to face scrutiny. While the European Commission may not necessarily block the deal, the investigation could lead to significant delays and require concessions from Broadcom. The Commission has until May 11th, 2023, or 90 working days from the announcement, to make a decision. If the deal falls through, it would parallel Broadcom’s unsuccessful bid to acquire chipmaker Qualcomm in 2018, which was blocked by the Trump administration for different reasons.