Broadcom agrees to buy VMware for $61 billion

Chip giant Broadcom will acquire software maker VMware for $61 billion in cash and stock, the companies announced Thursday, in one of the largest tech mergers of all time.

San Jose-based Broadcom is a leading producer of semiconductors, as well as much of the essential hardware underpinning data centers. It took in a record $7.7 billion in revenue in its most recent quarter and reported a 23% jump in operating profit. VMware, based in nearby Palo Alto, produces software-virtualization technology that makes servers more efficient. It recorded more than $3 billion in sales in its most recent quarter.

Under the terms of the transaction, shareholders can either take $142.50 in cash or a 0.2520 share of Broadcom for every share of VMware. That represents a more than 40% premium over VMware’s stock price before reports of the takeover first surfaced.

The deal coincides with a brutal, months-long sell-off on Wall Street, fueled by inflation and recession fears, that have taken an outsized toll on the technology stocks that powered much of the tremendous rally that started early in the pandemic. The techheavy Nasdaq index is deep into a bear market, having fallen 30 percent since its November 2021 peak.

“This is a historic deal that speaks to the consolidation in the tech sector during this downturn with this marriage making a ton of strategic sense,” said Wedbush analyst Dan Ives. “Broadcom buying

VMware is also bullish for the cross pollination between cloud and 5G globally over the coming years.”