Filed by Broadcom Inc.
pursuant to Rule 425 under the
Securities Act of 1933
and deemed filed pursuant to Rule
14a-12
under the Securities Exchange Act
of 1934
Subject Company: VMware, Inc.
Commission File No.: 333-266181
Date: December 1, 2022
On December 1,
2022, Broadcom Inc. published the following post on LinkedIn:
On December 1,
2022, Broadcom Inc. published the following post on Twitter:
On December 1,
2022, Broadcom Software Group published the following post on
LinkedIn:
On December 1,
2022, Broadcom Software Group published the following post on
Twitter:
[The text of the article
accessible through the link included in the posts above is
reproduced below.]
Is It Time To Start
Giving Broadcom’s Pending Acquisition Of VMware A Chance?
Patrick Moorhead,
Senior Contributor
My first impression of the notion of Broadcom acquiring VMWare
was negative.
I was most familiar with Broadcom’s acquisitions in the
semiconductor space. The company had, and still has, a shrewd
reputation for transforming its semi acquisitions and turning them
into money-printing machines. Semi transformations require taking
significant actions on product roadmaps and resources like laying
off people. I’ll add that even in Broadcom’s software history, many
questioned certain of the actions related to CA and Symantec
transformations.
So, it would be natural for people to question this
acquisition.
I have read the many scribes from Broadcom CEO Hock Tan
circumnavigating the globe talking to the VMware ecosystem, but
after personally talking with Tan and chatting with a few VMware
partners and customers, I am wondering, is it time we start giving
the acquisition a chance?
With most acquisitions, neither the acquirer nor the acquiree
can say much publicly. There’s a “clean room” that is established
to map out the future where executives are removed from its
operational, day-to-day roles, and nothing, literally nothing, gets
communicated outside that room. Legally, companies cannot openly
work together until regulatory bodies OK the deal. If VMware and
Broadcom were to get too close too soon, it would likely violate a
litany of laws, including antitrust.
With this acquisition, Broadcom CEO Hock Tan has been very
communicative, often indirectly responding to pointed criticism.
That should be very positive for VMWare customers, its ecosystem,
and Broadcom shareholders.
Hear me out.
Responding directly to the
criticism
On CA and Symantec’s enterprise security business, Tan has
been very clear that both companies had underinvested with product
lines that were not ready for the cloud. I agree with this
assessment. CA and Symantec’s offerings pre-acquisition were not
compellingor prepared for the cloud future. Tan saw the opportunity
to invest in areas where customers would find profitable dollars,
and he shifted the company in that direction. If you were running
Broadcom, would you have done things differently? Particularly with
Symantec, if offerings weren’t improved and modernized, all its
customers would have bailed. It lost a bit of share, but it wasn’t
a mass exodus.
In semiconductors, Broadcom had a reputation for acquiring
businesses, focusing R&D investment and raising prices. I had
many conversations with infrastructure companies that said the
prices of “that sole-sourced network switch” increased. I can argue
both ways- was the OEM taking advantage of the previous company
that was giving away its technology at too low a price, or did the
OEM not make a long-term agreement to lock in prices, so too
bad?
While Tan doesn’t categorically say he
won’t raise prices ever,
what CEO can ever make
that commitment? He doesn’t even own the company yet, and I
challenge my readers to show me a quote from any tech CEO,
including VMware’s or Microsoft’s or AWS’s or RedHat’s, who stated
it wouldn’t ever raise prices. Having run many multi-billion-dollar
businesses, let’s be adults- do a long-term pricing agreement and
move on.
Tan does say, “By delivering long-term
value to customers and investing in improved, customer-focused
R&D, we can innovate, scale, and offer better products without
raising prices.” My translation? If we have a money-losing
relationship together, which means I cannot invest in the right
leadership products you want in the future, our arrangement needs
to change. What tech business leader wouldn’t do this?
There was also a lot of chatter about
Tanzu and the fear that it would be deprecated. Tan doesn’t mince
words on this one. On Tanzu’s future, he says, “I see Tanzu as a
strategic part of the VMware software portfolio, and it will remain
that way as we move forward within Broadcom.” Any questions on this
one?
I think we should be most confident on
multi-cloud. Most of the communications I have seen from Tan are
very clear that the world is multi-cloud, and that’s where the
short- and long-term R&D spending will go. I think this is the
big Broadcom opportunity.
The hybrid,
multi-cloud opportunity
In a former life, my company supplied
datacenter CPUs to the largest cloud hyperscaler on the planet. In
Dot Com 1.0, I once managed, for a short time, the US’s largest x86
cloud datacenter. I’m not a public cloud denier.
Yet 10 years ago, when I was espousing
the benefits of a “private” or “hybrid cloud,” I took some barbs as
a “public cloud denier.” Haters
going to hate. Today, even AWS, the most prominent, previous
denier of private clouds, offers the widest variety of hybrid cloud
options with Outposts, Wavelength, Local Zones, Snow, ECS, and EKS
Anywhere. Now everybody agrees, including AWS, that the enterprise
estate will comprise of infrastructure in the public cloud,
on-prem, or colo private cloud that operates in a hybrid manner
with the public cloud and, of course, on the edge.
The only thing some are questioning is
multi-cloud. Well, some public cloud vendors are. Enterprises have
spoken already. I have yet to meet with an F1000 CIO that doesn’t
use multiple public clouds, be it AWS, Azure, Google, Oracle, or
IBM Cloud. Every enterprise has a private cloud. Big enterprises
are already multi-cloud, but it’s not very efficient. For each
cloud, you need a different DevOpsInfoSec team and different
processes per cloud. Each cloud has a different way of handling
security, networking, and data. I am not expecting all the public
cloud players to have magic interoperability APIs that solve this
issue.
This is where VMware comes into the
picture. In my years of assessment on hybrid, multi-cloud, I see
VMware as potentially one of the big winners of the cloud
era.
With the combination of VMware Cloud
Foundation+, Tanzu, and Aria, VMware provides the app (container +
VM), security, and networking layers to the multi-cloud puzzle,
including, of course, on-prem, colo, and edge environments. This
should mean consistent development, operations (with
observability), and security across all clouds.
No doubt, the multi-cloud competition
is fierce. Every public cloud provider wants you to go all-in on
its cross-platform containers, networking, and security. The
challenge there? For the largest public cloud providers, it’s not
yet in their best interests to make multi-cloud easy or affordable.
If I ran those operations, I would be doing the same thing.
IBM’s RedHat has the dominant
container share and robust multi-cloud container service. Cisco
offers a multi-cloud networking and security fabric with a very
compelling observability capability. HPE has its own platform (and
also works with VMware). Dell, of course, works closely with VMware
and RedHat.
I know for sure the future is hybrid,
multi-cloud, but it is not being done efficiently, and IT needs
tools and services to simplify it and make it less costly. Tan has
called multi-cloud, “the future of enterprise IT,” so I can’t
imagine Broadcom will mess with VMware’s multi-cloud stack, which
represents a gigantic business opportunity and what I believe is
the growth driver for
VMware.
Wrapping up
I understand the questions about
VMware’s acquisition by Broadcom. My quick take was negative. I get
it. I think Broadcom initially misjudged the amount of
communication it had to do with VMware’s customers, ecosystem, and
channel partners. To its credit, Broadcom quickly responded and
shared more information on what it intends to do and operate in the
future, providing a lot more than what I have seen other tech
companies communicate.
Like you, I still have questions. I’d
like to know exactly how
it plans to achieve the $8.5B EBITDA contribution. Still, the
reality is that not all these questions can even be legally
answered until and likely after transaction close. My instinct says
there are many OPEX overlaps across CA, Symantec, and VMware. I
also think there will need to be more than OPEX cuts to hit that
number, as I’m not expecting an immediate, parabolic revenue
surge.
What I do think we know are the
following:
Ultimately, I think it’s time to give
the deal a chance and focus on what it will take to make it
successful. The questions and criticisms have served their purpose,
and it looks like Broadcom is listening.
Cautionary Statement Regarding
Forward-Looking Statements
This communication relates to a
proposed business combination transaction between Broadcom Inc.
(“Broadcom”) and VMware, Inc. (“VMware”). This communication
includes forward-looking statements within the meaning of Section
21E of the U.S. Securities Exchange Act of 1934, as amended, and
Section 27A of the U.S. Securities Act of 1933, as amended. These
forward-looking statements include but are not limited to
statements that relate to the expected future business and
financial performance, the anticipated benefits of the proposed
transaction, the anticipated impact of the proposed transaction on
the combined business, the expected amount and timing of the
synergies from the proposed transaction, and the anticipated
closing date of the proposed transaction. These forward-looking
statements are identified by words such as “will,” “expect,”
“believe,” “anticipate,” “estimate,” “should,” “intend,” “plan,”
“potential,” “predict,” “project,” “aim,” and similar words or
phrases. These forward-looking statements are based on current
expectations and beliefs of Broadcom management and current market
trends and conditions.
These forward-looking statements
involve risks and uncertainties that are outside Broadcom’s control
and may cause actual results to differ materially from those
contained in forward-looking statements, including but not limited
to: the effect of the proposed transaction on our ability to
maintain relationships with customers, suppliers and other business
partners or operating results and business; the ability to
implement plans, achieve forecasts and meet other expectations with
respect to the business after the completion of the proposed
transaction and realize expected synergies; business disruption
following the proposed transaction; difficulties in retaining and
hiring key personnel and employees due to the proposed transaction
and business combination; the diversion of management time on
transaction-related issues; the satisfaction of the conditions
precedent to completion of the proposed transaction, including the
ability to secure regulatory approvals on the terms expected, at
all or in a timely manner; significant indebtedness, including
indebtedness incurred in connection with the proposed transaction,
and the need to generate sufficient cash flows to service and repay
such debt; the disruption of current plans and operations; the
outcome of legal proceedings related to the transaction; the
ability to complete the proposed transaction on a timely basis or
at all; the ability to successfully integrate VMware’s operations;
cyber-attacks, information security and data privacy; global
political and economic conditions, including cyclicality in the
semiconductor industry and in Broadcom’s other target markets,
rising interest rates, the impact of inflation and challenges in
manufacturing and the global supply chain; the impact of public
health crises, such as pandemics (including COVID-19) and epidemics
and any related company or government policies and actions to
protect the health and safety of individuals or government policies
or actions to maintain the functioning of national or global
economies and markets; and events and trends on a national,
regional and global scale, including those of a political,
economic, business, competitive and regulatory nature.
These risks, as well as other
risks related to the proposed transaction, are included in the
registration statement on Form S-4 and proxy statement/prospectus
that has been filed with the Securities and Exchange Commission
(“SEC”) in connection with the proposed transaction. While the list
of factors presented here is, and the list of factors presented in
the registration statement on Form S-4 are, considered
representative, no such list should be considered to be a complete
statement of all potential risks and uncertainties. For additional
information about other factors that could cause actual results to
differ materially from those described in the forward-looking
statements, please refer to Broadcom’s and VMware’s respective
periodic reports and other filings with the SEC, including the risk
factors identified in Broadcom’s and VMware’s most recent Quarterly
Reports on Form 10-Q and Annual Reports on Form 10-K. The
forward-looking statements included in this communication are made
only as of the date hereof. Neither Broadcom nor VMware undertakes
any obligation to update any forward-looking statements to reflect
subsequent events or circumstances, except as required by
law.
No Offer or Solicitation
This communication is not
intended to and shall not constitute an offer to buy or sell or the
solicitation of an offer to buy or sell any securities, or a
solicitation of any vote or approval, nor shall there be any sale
of securities in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offering of
securities shall be made, except by means of a prospectus meeting
the requirements of Section 10 of the U.S. Securities Act of 1933,
as amended.
Additional Information about the
Transaction and Where to Find It
In connection with the proposed
transaction, Broadcom has filed with the SEC a registration
statement on Form S-4 that includes a proxy statement of VMware and
that also constitutes a prospectus of Broadcom. Each of Broadcom
and VMware may also file other relevant documents with the SEC
regarding the proposed transaction. The registration statement was
declared effective by the SEC on October 3, 2022 and the definitive
proxy statement/prospectus has been mailed to VMware shareholders.
This document is not a substitute for the proxy
statement/prospectus or registration statement or any other
document that Broadcom or VMware may file with the SEC. INVESTORS
AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT,
PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT
MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS
TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN
THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and
security holders may obtain free copies of the registration
statement and proxy statement/prospectus and other documents
containing important information about Broadcom, VMware and the
proposed transaction once such documents are filed with the SEC
through the website maintained by the SEC at http://www.sec.gov.
Copies of the documents filed with the SEC by Broadcom may be
obtained free of charge on Broadcom’s website at
https://investors.broadcom.com. Copies of the documents filed with
the SEC by VMware may be obtained free of charge on VMware’s
website at ir.vmware.com.