Broadcom Inc’s AVGO acquisition of VMware, a leading cloud-computing and virtualization firm, has sparked concern among Europe-based Cloud Infrastructure Service Providers of Europe (CISPE).
Following the acquisition, CISPE urges regulators to address the pricing and business model adjustments Broadcom has implemented within VMware’s partnership program.
These changes, set to take effect this month, could compel companies that license and resell VMware software to either absorb increased costs or pass them on to customers, the Wall Street Journal reports.
The adjustments include shifting from perpetual licenses to a subscription model and a new billing calculation method, which Broadcom asserts will offer long-term customer value.
CISPE contends that Broadcom’s VMware, as a dominant force in cloud virtualization, should be considered a “gatekeeper” under the European Union’s Digital Markets Act, criticizing the company for imposing “take it or leave it” terms on its customers.
The group’s secretary general, Francisco Mingorance, is appealing to European and national regulators to halt the termination of existing contracts, highlighting the significant challenges and costs associated with transitioning away from VMware.
VMware, founded in 1998, has been crucial in the development of cloud computing. Its recent $69 billion acquisition by Broadcom led to substantial changes, including a revamped software portfolio and partner network.
Previous reports indicated KKR & Co Inc KKR set to acquire Broadcom’s VMware software division for $4 billion.
Meanwhile, Broadcom is at the forefront of developing technologies for the next generation of AI infrastructure, responding to cloud and data center providers’ rapid construction of AI systems.
These systems demand unprecedented performance, scale, and efficiency, fueled by consumer AI applications and the need for custom AI accelerators that operate at the lowest possible power.
To meet these needs, Broadcom is advancing a comprehensive portfolio that includes foundational technologies and sophisticated packaging capabilities designed to create the most efficient, high-performance custom AI accelerators.
Furthermore, Broadcom offers a full suite of end-to-end merchant silicon connectivity solutions, encompassing top-tier Ethernet and PCIe to optical interconnects with co-packaging capabilities essential for scaling AI clusters.
Broadcom’s recent innovations aim to strengthen its position in custom AI accelerators, Ethernet, PCI Express, and optical interconnect portfolios, leveraging its world-class SerDes and DSP technologies to support AI infrastructure.
Broadcom anticipates generating $10 billion from AI chip sales in 2024. Citi analyst Christopher Danely during a CEO meet noted Broadcom considers the $400 billion AI Total Addressable Market (TAM) within reach, favoring the growth prospects of custom Application-Specific Integrated Circuits (ASICs) over Graphics Processing Units (GPUs) for their sustainability and benefits from AI advancements and its VMware acquisition, projected to contribute 23% to its fiscal 2024 sales.
The stock gained over 92% last year. Investors can gain exposure to the stock via Amplify ETF Trust Amplify Cybersecurity ETF HACK and Invesco Next Gen Connectivity ETF KNCT.
Price Action: AVGO shares traded lower by 0.04% at $1,237.46 on the last check Wednesday.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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