EU launches official probe into Broadcom’s VMware acquisition

The European Commission which is the competition branch of the EU has began its inquiry of Broadcom’s proposed acquisition of VMware.

The Commission is opposed to the $61 billion deal with unfair competition being their major concern.Its fear is that Broadcom could run down its hardware competitors by making the widely used VMware virtualization software incompatible with certain third-party hardware components.

Here is what Margrethe Vestager, the Commission’s vice president, had to say. “Broadcom, a major supplier of hardware components, is acquiring VMware, a key server virtualization software provider. Our initial investigation has shown that it is essential for hardware components in servers to interoperate with VMware’s software. We are concerned that after the merger, Broadcom could prevent its hardware rivals to interoperate with VMware’s server virtualization software. This would lead to higher prices, lower quality and less innovation for customers and consumers.”

Another major concern that comes with the acquisition is on the continuation of Project Moneterey. In 2020 VMware entered into a deal with with Intel, Nvidia, and AMD to reachitecture the VMware Cloud Foundation to accommodate modern applications.

Part of the deal involved building SmartNICs that would reduce the load on the CPU. The Commision worries Broadcom could interfere with this deal in a bid to protect its own NICs revenue and consequently hinder innovation.

However, Broadcom is confident that the European Commission will approve the merger and hopes to close the deal by the end of its fiscal year 2023 which began last month.

The hardware manufacturer has already received legal merger clearance with various regulatory bodies around the world including Brazil, Canada, and South Africa. They have also received foreign investment control clearance from Germany, Austria, France and Italy.

“The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multicloud era, and we are confident that regulators will see this when they conclude their review,” Broadcom said in a statement.

The EU commission has until May 11 2023 to make its decision.