The European Commission is concerned that Broadcom could restrict competition for certain hardware components that interoperate with VMware’s software.
The EU has launched an in-depth investigation into Broadcom’s planned acquisition of cloud services provider VMware.
The $61bn deal announced earlier this year would see the Broadcom Software Group rebrand and operate as VMware, incorporating Broadcom’s infrastructure and security software as part of an expanded VMware portfolio.
However, the European Commission is concerned that the deal would allow Broadcom to restrict competition in the market for certain hardware components that interoperate with VMware’s software.
EU competition chief Margrethe Vestager said an initial investigation found that it is “essential” for hardware components in servers to interoperate with this software.
“We are concerned that after the merger, Broadcom could prevent its hardware rivals to interoperate with VMware’s server virtualisation software,” Vestager added. “This would lead to higher prices, lower quality and less innovation for customers and consumers.”
The in-depth investigation will examine whether Broadcom may hinder the development of smart network interface cards (smartNICs). VMware launched Project Monterey in 2020 with smartNIC sellers Nvidia, Intel and AMD Pensando.
The EU is concerned that Broadcom may decrease VMware’s involvement in this project to protect its own NIC revenues, which could “hamper innovation to the detriment of customers”.
It is also concerned that Broadcom will stop offering VMware’s virtualisation as a standalone product and instead bundle it with Broadcom’s own software, restricting choice and impacting competitors.
Broadcom previously said the deal aligns with its strategy of scaling its software business and would offer new growth opportunities. The semiconductor giant took a big leap into the software sector when it acquired enterprise software vendor CA Technologies for almost $19bn in 2018.
It previously made a $103bn takeover bid for Qualcomm, but the deal was blocked by US president Donald Trump in 2018 over national security concerns.
The European Commission now has until 11 May 2023 to make a final decision on the proposed acquisition of VMware.
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