Rumors: Broadcom Planning VMware Layoffs As $61 Billion Deal Closure Looms

Rumors started circulating this week that VMware layoffs are in the works.

Insider, which requires a subscription, first reported the news, calling the affected number of people “huge.” Apparently, Broadcom will enact a large number of VMware layoffs once it closes the pending $61 billion acquisition.

Other outlets then picked up the scoop, though few details are available. Broadcom did not respond to Channel Futures’ request for comment. The reports indicate the VMware layoffs could come as soon as the end of this month once both companies release their latest earnings. The cuts supposedly would target non-engineers.

Meanwhile, the possibility of VMware layoffs looms as the redacted version of Broadcom’s recent filing with U.K. regulators has come to light. The Competition and Market Authority last month gave provisional approval to the Broadcom-VMware pairing. Not long after, Broadcom’s legal filing from May hit the internet.

In essence, Broadcom appears to have little faith in VMware’s ability to execute on its cloud strategy, with which channel partners are very familiar, especially without help.

For starters, Broadcom asserts that it will invest “[redacted] more per year to improve VMware’s products … and therefore increase sales by [redacted] over three years.”

To do this, Broadcom added, “Broadcom must enable VMware to compete more effectively with [Amazon Web Services, Microsoft Azure and Google Cloud] for enterprise workloads and stem the loss of workloads from VMware to the public cloud.”

But that’s not all.

‘VMware Has Failed’

As another example of Broadcom’s view of VMware, consider this excerpt:

“VMware has a strong core technology and operates in a proven and growing market for enterprise workloads. But VMware’s own internal documents describe its market position as a ‘redacted’. … Broadcom believes it can provide VMware with the scale and capabilities to reverse this trend. Broadcom plans to win more enterprise workloads by [redacted]. With time and investment, Broadcom’s objective is to enable enterprises more easily to deploy workloads across cloud environments (both private and public) and to move workloads among those environments. In short, Broadcom intends to execute Phases 2 and 3 of VMware’s growth plan … that VMware has failed to do and is unable to achieve alone.”

When it comes to private cloud, Broadcom seems particularly concerned. Indeed, as demand for that form of private cloud computing grows, Broadcom wants in on the profits. But it’s unsure of VMware’s strategy in this domain.

“VMware has been unable to persuade its customers to license and deploy its Private Cloud software,” Broadcom wrote in May as it sought to convince U.K. regulators to approve its VMware purchase. “Of VMware’s top [redacted] customers, only [20-30]% (~[redacted] customers) have purchased VMware’s Cloud Foundation (VCF) software. This VCF Private Cloud software seeks to enable VMware customers to virtualise their entire datacentres (using vSphere to virtualise servers, vSAN to virtualise storage, and NSX to virtualise the network). Today, only [5-10]% of VMware’s top [redacted] customers (~[redacted] customers) [redacted] VCF.”

The “low uptake,” Broadcom added, comes “despite the demand generally among enterprises to build private clouds as an alternative to public cloud. Indeed, … the CSPs are moving into private cloud, which is a segment that is projected to grow substantially as part of the broader cloud market. … Broadcom has learned from its due diligence that this is because VMware’s Private Cloud software is [redacted]. Fewer than [20-30]% of enterprises that have [redacted].”

A Significant Channel Play

The commentary almost makes one wonder why Broadcom wants VMware so badly, if it sees so much weakness. To that perception, Broadcom appears to have an answer.

The company told the U.K.’s CMA that it will put an extra $1 billion per year into VMware’s R&D, and another $1 billion-$2 billion each year into VMware’s professional services capabilities.

There’s a significant channel angle on that last point. Read what Broadcom wrote:

“Broadcom plans to train and certify up to [redacted] external professionals over three years at Global Systems Integrators (GSIs), such as [redacted], to enable them to provide enterprises with the necessary expertise to [redacted]. GSIs would also highlight and promote better ways for enterprises to deploy and embed workloads in a private cloud based at their on-premises datacentres (or hosted off premises) instead of moving workloads to the public cloud.”

Could VMware Layoffs Happen Right Away?

Broadcom hopes to close its purchase of VMware no later than Nov. 26. VMware layoffs could happen before that date and even after. But Broadcom probably can’t risk being seen as a demolisher of jobs, so may take its time enacting VMware layoffs or string them out. To be sure, the company already has faced multiple regulatory obstacles and hiccups in its pursuit of VMware. Broadcom just surmounted one of the biggest of those, though, after securing approval from the European Commission. The U.S. Federal Trade Commission has yet to give its blessing.