This article discusses the proposed acquisition of VMware by Broadcom, with a focus on whether or not the deal is a good value for both companies. Here are some key points from the article:
Background: Broadcom has offered to acquire VMware for $61 billion, which represents a 44% premium over VMware’s closing price before news of the deal broke.
VMware’s growth: VMware has been transitioning its business model from license-based revenues to subscription and SaaS (Software as a Service) revenues. While this transition is expected to lead to slower aggregate growth in the short term, it may ultimately be beneficial for the company.
Limited growth potential: The article suggests that VMware’s growth may be limited due to its reliance on traditional licensing revenue streams, which are being cannibalized by SaaS revenue. This could impact the company’s ability to grow rapidly in the future.
Valuation: The article concludes that Broadcom is not underpaying for VMware, citing the 44% premium over the closing price before news of the deal broke. However, it notes that the value of software revenues has been down recently, even for quickly growing companies.
Other potential bidders: While the article does not identify any other potential bidders for VMware, it suggests that if another company could benefit more from acquiring the company, they may have considered making a bid at a higher price.
Conclusion: The article concludes that while the deal may not be a perfect fit for either company, Broadcom is likely to proceed with the acquisition given the premium offered.
