Broadcom, a prominent U.S. chipmaker, is poised to receive conditional approval from the European Commission for its proposed $61 billion acquisition of cloud computing firm VMware, according to Reuters.
However, this clearance is contingent upon Broadcom addressing concerns related to competition and interoperability with its rivals. While the EU’s decision is scheduled for July 17, the U.K. competition agency (CMA) and the U.S. Federal Trade Commission (FTC) are also investigating the acquisition. This article delves into the details of the approval process and highlights the potential implications for the market.
EU Antitrust Approval and Remedies
According to confidential sources from Reuters, Broadcom is expected to gain conditional antitrust approval from the European Commission for its acquisition of VMware. The approval is tied to remedies aimed at addressing concerns over Broadcom’s interoperability with competitors. While both Broadcom and the European Commission declined to comment, the news led to a significant increase in Broadcom’s share price, surging nearly 5%. VMware’s shares also experienced a positive upswing of 2.7%.
Remedies and Focus on Fibre Channel Host-Bus Adapters (FC HBAs)
One of the proposed remedies centers around Fibre Channel Host-Bus Adapters (FC HBAs), specifically targeting competitor Marvell Technology. FC HBAs are storage adapters that connect servers to storage-area networks using the fiber channel protocol. Broadcom is a prominent supplier of FC HBAs and dominates the market. While Marvell Technology has yet to respond to the matter, this remedy is aimed at mitigating concerns related to potential anticompetitive effects on the market.
U.K. Competition Agency and U.S. Federal Trade Commission Investigations
Apart from the European Commission’s scrutiny, Broadcom faces additional hurdles in the form of investigations by the CMA and the FTC. The British competition agency is set to announce its provisional findings regarding the acquisition in the coming month, including any potential remedies if deemed necessary. Notably, the CMA garnered attention after it blocked Microsoft’s Activision deal, highlighting the significance of its decision. Simultaneously, the U.S. Federal Trade Commission is conducting its own investigation into Broadcom’s acquisition of VMware.
Market Implications and Broadcom’s Diversification
Broadcom’s acquisition of VMware is the company’s largest deal to date, serving as a strategic move to diversify its portfolio into enterprise software. As a major supplier of chips used in data centers and specialized chips for AI acceleration, Broadcom aims to expand its presence in the enterprise software market through this acquisition. However, the outcome of the regulatory scrutiny will have a significant impact on Broadcom’s expansion plans and the competitive landscape of the market.
