Analysts’ concerns about Broadcom’s buy of VMware not wavering

Alarm bells appear to be ringing everywhere about the much delayed US$61 billion sale of VMware to Broadcom and what it will mean to the VMware customer base.

Earlier this week, the website Silverlinings posted an article indicating that Gartner consultants were sticking by a prediction made in December that the majority of VMware customers would be well advised to “identify exit ramps for deployed VMware products including identifying alternative solutions, migration plans, costs, risks and timetables.”

Those suggestions were contained in a Quick Answer note written by Gartner analysts Andrew Lerner, Michael Warrilow and Dennis Smith, in which the three stated that “Broadcom’s proposed acquisition of VMware has been a topic of interest and concern to many IT leaders.

“Since the acquisition was announced, Gartner has received (and continues to receive) numerous inquiries from VMware customers who are worried about the potential for dramatic pricing increases, the elimination of, or reduced investment in some VMware products and a reduction in overall customer experiences, including support and channel.”

They point out in the document that customer concerns stem primarily from “Broadcom’s actions associated with prior acquisitions of CA Technologies and Symantec, in which numerous customers complained about dramatic cost increases during renewals, with very limited flexibility for negotiations.”

IT Business reached out to the research firm this week via email, and Lerner confirmed that the “core Gartner opinion and perspective has largely remained.”

In addition, he said that the “volume of interest from Gartner clients in the acquisition has dropped substantially. Thus, they have reached a level of acceptance and recognize they have limited control. Many are heads down in planning for negotiations and/or evaluating other options, and some are taking a wait-and-see approach.”

Broadcom, he wrote, has filed public statements which reinforce some of Gartner’s core research positions, “including a heavy focus and commitment to the VMware VCF suite and renewed focus on professional services. There is more focused concern regarding specific VMware products that Broadcom is not talking about, such as the end user compute portfolio.”

Gartner is not the only research firm standing by its past reactions to the multi-billion-dollar acquisition, which still needs approval from the European Union – and it is not guaranteed that will happen.

Last year, John Annand, a director of the infrastructure team at Info-Tech Research and Forrester senior analyst Tracy Woo expressed their concerns – see related link above – and both said yesterday that their views have not changed.

Annand in an email reply said his comments in the article “still stand. We identified concerns almost immediately after the news broke last year, and we are now seeing regular requests from our members looking to discuss alternate virtualization platforms.”

In a blog posted soon after the acquisition was announced, Woo wrote that, despite stock price increases, this is not welcome news for VMware customers.

“For acquired companies, a Broadcom acquisition sparks fears of price hikes, diminished support and stunted innovation,” she said. “At a time when VMware customers need to re-establish confidence in the company’s strategy and innovation plans after beloved ex-CEO Pat Gelsinger’s departure, this would be a notable departure from that course.

“After all, VMware customers should be concerned, especially if Broadcom follows the same playbook it used for its CA and Symantec acquisitions. Following these purchases, CA and Symantec customers saw massive price hikes, worsening support, and stalled development.”

Asked in an interview yesterday about whether an exit plan from VMware makes sense, she said it depends on the customer. She said that at a recent analyst briefing organized by Broadcom, the company was “very clear about the type of customers that they support – their Top 600 revenue earners, who are generally in highly regulated industries.

“Where I would be concerned is if I am a smaller company and looking to push something new on whatever market that I am in and depending on the VMware roadmap.”

The thinking from Broadcom is that smaller customers will be able to rely on channel support, said Woo, but even that might not be good enough for some if overall support from Broadcom ends up being scaled back.

In terms of the channel, Woo said “she has spoken with channel partners who (also) have concerns and have asked me the same question: Should we be thinking about exit plans? Should we be thinking about alternatives?”

The answer to both, she said is, “Yes. I would be looking at other partners that have a similar profile or potentially think about pursuing other market opportunities.”

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Paul Barker
Paul Barker
Paul Barker is the founder of PBC Communications, an independent writing firm that specializes in freelance journalism. He has extensive experience as a reporter, feature writer and editor and has been covering technology-related issues for more than 30 years.

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