Robi Maddison Tech 05.23.2022 01:May AM EDT

Broadcom Moves Closer to Software Territory With Planned Acquisition of Cloud Computing Company VMware

According to people familiar with the matter, Broadcom Inc. is looking to expand its business to the area of software.

(Photo : Broadcom /Screenshot taken from the official Broadcom website)

Chipmaker Broadcom Plans To Acquire Cloud Computing Company VMware

The chipmaker is said to be in talks to acquire cloud-computing company VMware Inc. The negotiations are still underway, according to anonymous sources, and there's no certainty they'll result in a purchase.

Broadcom manufactures a wide spectrum of electronics, with devices ranging from the iPhone to industrial machinery. However, data centers have become a crucial source of growth for the company, and expanding its software portfolio gives it more avenues to target that market.

Bloomberg said that the VMware deal would continue Broadcom Chief Executive Officer Hock Tan's acquisition spree, which has seen him build one of the chip industry's largest and most diverse businesses.

Broadcom purchased CA Technologies in 2018 and Symantec Corp.'s enterprise security business in 2019. The software space has been a primary focus in recent years.

Why Did Broadcom Want To Invest in Software?

It was said that Broadcom's reliance on semiconductors could be reduced with software investments.

Chipmakers such as Broadcom have seen a surge in sales in recent years, owing to the increasing use of semiconductors in more goods and the demand for work-from-home technologies during the pandemic. However, Tan has warned that the good times are unlikely to stay as he "expects the chip business to decelerate to historical growth rates of about 5%."

Broadcom Has Attempted To Purchase Other Companies Previously

As per a Bloomberg report, Broadcom has previously offered to buy SAS Institute Inc., a closely held software company with a market capitalization of $15 billion to $20 billion. However, those talks concluded without a settlement last year.

Tan's most significant acquisition attempt, a deal to buy rival chipmaker Qualcomm Inc., has similarly failed. After facing resistance from the Trump administration, he was forced to abandon the deal in 2018.

More About VMware

Founded in 1998, VMware is a "pioneering Silicon Valley company that has already changed hands a number of times." It created virtualization software, which consolidated applications and workloads on fewer server computers, allowing each server to run several programs.

VMware struggled to keep up with the expansion and carve out a vital role as more tasks shifted to the cloud. Amazon.com Inc., one of the largest providers of cloud storage and services, eventually formed strong cooperation with the company.

In 2004, VMware was purchased by storage technology behemoth EMC Corp. Three years later, that company sold a portion of its stake as part of VMware's initial public offering. When Dell Technologies Inc. acquired EMC in 2016, the business was transferred to Dell Technologies Inc. However, last year, VMware was spun out from Dell.

According to Bloomberg data, Michael Dell and private equity company Silver Lake remain VMware's top investors.