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Broadcom’s VMware strategy is winning despite market friction
- Broadcom's acquisition of VMware is going almost exactly as expected when the deal was announced in May 2022.
- Customers are actively moving many low value workloads off VMware, but most mission-critical work is staying put, allowing Broadcom to integrate VMware into its highly successful business model.
- Broadcom is marketing the economic benefits of going all-in on the VMware Cloud Foundation bundle despite negative sentiment in the press and social media.
- Broadcom has done extensive total-cost-of-ownership and economic analysis which appears quite defensible, assuming customers go all-in on VCF.
- Broadcom has significant upside to its VMware business if it can convince customers to stay with its VCF bundle.
- Several industry surveys indicate a large percentage of customers are looking to migrate off VMware, but migrations are nontrivial and almost always more expensive than staying put.
- Broadcom is executing ahead of expectations on its VMware progress and is establishing the basis for a long-term platform asset that will be an industry force for the next decade and perhaps beyond.
- Customers should keep the roadmap of Broadcom in mind, negotiate the best deal, and identify low-value/low-risk workloads that can be easily moved to an alternative.
- Understand VMware’s AI roadmap and spend ample time evaluating its ecosystem partners' approach when it comes to data feeding AI.
- Broadcom's non-GAAP operating margins are historically above 60% and four to six times better those of most virtualization competitors/partners (e.g. Dell, Nutanix, Red Hat/IBM, HPE and so on).
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