Broadcom said in talks to purchase VMware (update)

Justin Sullivan/Getty Images News

Update 9:25am: Updates shares, add transaction details.

Broadcom (NASDAQ:AVGO) is said in talks to acquire cloud-computing company VMware Inc. (NYSE:VMW). VMW shares surged 19% in premarket trading, while Broadcom fell 4.1%.

Talks are ongoing and could still fall apart, according to a Bloomberg report, which cited people familiar. The companies are discussing a cash and stock deal and an agreement may come soon, according to a WSJ report. The FT reported that deal could be valued at about $50 billion.

A deal could be reached by Thursday, when VMWare (VMW) is scheduled to release its quarterly results, though "material" terms of a transaction still need to be worked out, according to CNBC's David Faber.

VMWware (VMW) has a market cap of about $40 billion, while Broadcom (AVGO) has a market cap of $223 billion.

Broadcom (AVGO) attempted to purchase chipmaker Qualcomm (QCOM) for more than $100 billion in 2017, though withdrew its bid in 2018 after the deal was blocked by the Trump administration on national security concerns.

Dell Technologies (DELL) completed the spin-off of its 81% equity ownership in VMware (VMW) in November. VMware (VMW) distributed a special cash dividend of $11.5B to its VMware shareholders, including Dell, which received $9.3B.

VMware (VMW) is scheduled to report Q1 results on Thursday, while Broadcom (AVGO) is set to release its results on June 2.

Comments

[usiah]

Down ~23 as I write. Talk about ridiculous.

(long)

[ritholtz47]

@usiah
Disappointing man. Market is not happy at all with this deal. Actually they stopped dumping it from few sessions. News was out to some people.

[Scotts Miracle-Gro Sucks]

Might as well acquire stuff while prices are depressed

[brf69]

Everyone but no one wants to own VMWare?

[123AL]

Just keep the dividend on track!

[dmau3]

Piper Sandler PT at $151.

[snowbrick]

Pleaaaaaase no. Everything I've used that Broadcom has acquired has made my experience worse.

[VikingOne]

Not so convinced of the quality of VMware

[webchow]

Despite the doomsayers, companies are fat with cash and are looking for M&A to drive growth. As long as the children in Washington don't stand in the way, this consolidation will be good for the overall industry going forward. Looking for much more activity in the next few years.

[RetiredAndLovingLife]

Based on the premium $AVGO paid for CA this $vmw deal should be in the $125 range. Just guessing of course. Then again $VMW is a more valuable gem and I expect to see other bidders looking to tap this cash cow growing top line at double digits. Hang on tight! Yippee.

[Luculus]

@RetiredAndLovingLife
It's gonna be cash + stock though

[RollingTheDice]

Broadcom Inc. (AVGO)
543.19 -3.02 (-0.55%) At close: May 20 04:00PM EDT
543.00 -0.19 (-0.03%) After hours: May 20, 07:59PM EDT

Broadcom is almost 20% off it's high (677+) before the deal.
I'm expecting it to drop more.
Good entry point ahead ?

[low frequency]

@RollingTheDice depends on how Mr market reacts

[Amstragram]

@RollingTheDice AVGO was around 450$ a year ago, during the 2021 bubble, so doesn’t matter how off it’s high it is as the valuation is still way too rich at 8 times EV to sale and GAAP PE estimated around 25. Some semi companies with comparable quality business are trading at half those ratios.

[Mick Research]

@Amstragram After acquiring CA $AVGO does a lot of software too.

[Karl Kelly]

As a Boradcom shareholder, this is interesting. Hope they don't overpay. Dell was silly to not buy it all and spin it off.

[AlphaMove]

This is great news for $DAIO a leader in cloud and all semiconductors related security. Cyber security is becoming engrained in cloud technology.

[whoisjohngaltmn]

@AlphaMove really?

[ritholtz47]

Some one is dumping AVGO in last 3 trading sessions.

[Elon the GOAT]

This will be a stupid deal

[InvestmentFreak]

Bullish for $NTNX who could be next!

[Amstragram]

@InvestmentFreak hope not as this is so undervalued right now, a buy out would be too low !

[4121]

My father was the first patent counsel for Broadcom, though as an outside counsel, about 35 years ago. That was when they had the famous controversial CEO. My father said the one best factor in deciding what stocks to buy was how good the CEO was. Hock Tan is one of the best out there, so i will always hold a lot of Broadcom. I think a few of my holdings fall into that category, including TTD, Microsoft (post Ballmer), NVDA, and, of course, AMD (who I used to work for, when Jerry Sanders was their CEO).

I am now looking to buy non-technology companies. This economy could drive technology stocks further down a lot. Time to buy more reliable, high dividend stocks.

[ritholtz47]

@4121
What is story about TTD? Is it managed by strong CEO like Broadcom, NVDA and AMD?

[lowdawg81]

@ritholtz47
TTD was founded and managed by a fantastic CEO.

[jimoc]

@4121 Jerry Sanders had to be one of the worst ever.

[RWilliam]

Hock Tan is genius this is most likely another tactical move. AVGO largest position in our DRIP since 2018.

[Mister Doom]

Never go through not with this administration.

[HardCovenant]

@Mister Doom agreed, as Larry Summers pointed out the antitrust laws have been vaped by the juvenile FTC hipsters and a Columbia law school professor who wrote one of those school papers where you count the words

[ItsPlaytime]

Great fit, what a cheap profit machine to buy

[Tempyy]

When VMW dropped below $105, I started purchasing since it was trading under 15x Forward PE. As of Friday’s close, VMW was only 1.1% of my portfolio. I’m kicking myself for not buying more shares.

[Geo67]

@Tempyy vmw used to be 2.5% of my portfolio but now 1.5% after selling