Broadcom’s purchase of VMware will help the company diversify away from its core business designing and selling semiconductors into enterprise software, which can have larger margins. VMware’s products are used by enterprises to more efficiently run their own servers as well as cloud servers.
Broadcom is the most acquisitive semiconductor company and has strategically used mergers to fuel its growth in recent years. It previously purchased CA Technologies in 2018 for $18.9 billion and Symantec in 2019 for $10.7 billion.
But Broadcom had not made a large acquisition since 2019. In March, Broadcom CEO Hock Tan said that the company had the “capacity to do a good-sized acquisition.”
Broadcom planned to purchase Qualcomm in 2018 for $117 billion before the deal was hampered by then-president Donald Trump, citing national security.
VMware spun off from Dell late last year in an effort to pay off debt. Dell originally acquired the company when it bought EMC in 2016. Michael Dell, CEO and founder of Dell, owns about 40% of VMware.
News of the deal broke over the weekend, sending Broadcom shares lower. VMWare stock rose more than 24% on Monday.
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