Broadcom wins EU approval for $61 bn deal for VMware

U.S. chipmaker Broadcom secured EU antitrust approval on Wednesday for its $61 billion proposed acquisition of cloud computing firm VMware after offering remedies to help rival Marvell Technology.
Broadcom chipsetThe deal, Broadcom’s largest ever, will help the chipmaker diversify into enterprise software.

Broadcom offered Marvell and other rivals interoperability commitments related to its Fibre Channel Host-Bus Adapters (FC HBAs), a kind of storage adapters, the European Commission said.

Marvell and other rivals will have guaranteed access to the interoperability Application Programming Interfaces as well as to the materials, tools and technical support necessary for the development and certification of third-party FC HBAs, the EU competition enforcer said.

Marvell and other rivals will also have guaranteed access to the source code for all of Broadcom’s current and future FC HBA drivers through an irrevocable open source license.

“The commitments offered by Broadcom will enable its only rival Marvell, to continue competing on equal footing and ensure a similar protection for any future entrants,” EU antitrust chief Margrethe Vestager said in a news statement.

The U.S. Federal Trade Commission and the UK competition agency are also examining the deal.

“We continue to make progress with our various regulatory filings around the world, having received legal merger clearance in Australia, Brazil, Canada, the European Union, South Africa, and Taiwan, and foreign investment control clearance in all necessary jurisdictions,” Broadcom said in a news statement issued on Wednesday.

Broadcom offers, among other products, Fibre Channel Host-Bus Adapters (FC HBAs), storage adapters and Network Interface Cards (NICs), which are hardware components that connect servers to storage or network.

Broadcom has recently started expanding into software markets, mainly for security and mainframe applications.

VMware is a software supplier offering mainly virtualization software that interoperates with a range of hardware, including FC HBAs, storage adapters and NICs.

The Commission’s investigation

The Commission’s preliminary market investigation found that, by acquiring VMware, Broadcom could have restricted competition in the markets for the supply of NICs, FC HBAs and storage adapters.

The Commission’s in-depth investigation confirmed that the transaction, as initially notified, would harm competition in the worldwide market for the supply of FC HBAs.

In particular, the Commission found that:

Broadcom would have the ability and incentive to foreclose Marvell, the only rival on the market for the supply of FC HBAs, by restricting or degrading the interoperability between VMware’s server virtualisation software and Marvell’s hardware.

This would hamper Marvell’s ability to compete in a market where Broadcom is dominant, or at least holds a very strong position, leading to higher prices, lower quality and less innovation for business customers.

Broadcom does not hold a strong position in the market for storage adapters and NICs and will continue to face competition from several rival suppliers.

Broadcom would have no economic incentive to hinder the development of SmartNICs by other providers by decreasing VMware’s involvement in Project Monterey, an ongoing cooperation with three other SmartNICs sellers (NVIDIA, Intel and AMD Pensando), as such foreclosure would not be profitable.

Broadcom would not be able to bundle VMware’s virtualisation software with its own software (namely mainframe and security software) as such products are purchased by different divisions in a customer organization and/or at different points in time.