EU investigates Broadcom's $61 billion deal to buy VMware

One of the greatest (and most boring) technology acquisitions of all time could be blocked by the European Commission.

The European Union plans to conduct a full investigation into Broadcom's $61 billion bid to buy VMware. Following a preliminary investigation, the European Commission, the bloc's executive arm, said on Tuesday it believes the proposed acquisition could allow Broadcom to "restrict competition" in the markets for network interface cards, adapters Fiber Channel host bus and storage adapters.

Specifically, the EU is concerned that Broadcom could harm competition in these markets by limiting interoperability between competing hardware and VMware's server virtualization software. It's also concerned that the company could prevent or degrade access to VMware's software. The European Commission warns that these actions "could lead to higher prices, lower quality and less innovation for business customers and ultimately consumers".

The Commission will also examine whether Broadcom could prevent competitors like NVIDIA and Intel from developing their own smart network interface cards. Here, he highlights VMWare's involvement in Project Monterey, an industry-wide effort the company announced in 2020. "Broadcom may reduce VMware's involvement in Project Monterey to protect its own revenue from network cards", notes the Commission. "This could stifle innovation to the detriment of customers." Another concern is that Broadcom could start bundling VMware's virtualization software with its own mainframe and security tools, a move that would reduce choice in the market.

As one of the biggest tech acquisitions of 2022, Broadcom's bid to buy VMware was sure to grab some attention. The European Commission won't necessarily block the deal, but the investigation could significantly delay the deal and force Broadcom to make concessions. With today's announcement, the Commission has 90 working days or until May 11, 2023 to make a decision. Should the deal fall through, it would be a bitter repeat of Broadcom's 2018 bid to buy chipmaker Qualcomm. While the circumstances and concerns were different, the company was forced to abandon the takeover after the Trump administration blocked the transaction.

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