Broadcom-VMware Saga Update: Nutanix Wins, Carbon Black Sale, Hock Tan Pay
Nutanix expects “significant” opportunity from its rival’s moves; plus, look for big changes ahead for Carbon Black — and big money for CEO Hock Tan.
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If you’ve been wondering how VMware competitors might benefit from Broadcom’s decisions around the $61 billion acquisition, we have some insight for you.
“All the actions of Broadcom have created a significant multiyear opportunity for us to win customers, new customers, to gain market share.”
That’s the word from Rajiv Ramaswami, CEO of Nutanix, largely considered VMware’s most optimal full-stack alternative. (Much of that stems from Ramaswami’s career DNA — he served as chief operating officer of VMware from 2016-2020, which got him into some hot water after joining Nutanix. He also held other roles at the software provider before that. Ramaswami further has worked for Broadcom and Cisco.)
Still, as Ramaswami pointed out, “the timing of these things, the magnitude, is a bit unpredictable.”
That’s because, even as Nutanix boasts “a substantial pipeline of opportunities,” the company must navigate three key factors before those bites turn into revenue.
The first factor Nutanix must address is the waiting period between now and the end of many organizations’ VMware contracts. Many VMware users signed long-term deals as the Broadcom acquisition loomed because they needed to buy themselves some time, Ramaswami said. Most of those terms and conditions range between three and five years, so it could take a while before Nutanix sees substantial sales from switchovers (not that it, like other VMware rivals, isn’t talking up its advantages with end users and channel partners).
Second, Ramaswami expects a number of organizations to wait to switch from VMware until they’re ready to upgrade their infrastructure. These users have to go through the typical hardware depreciation cycles for servers, storage and so on, before they can justify new purchases.
“So the timing is not just a software purchase from us, but it's also whenever they're ready to modernize,” Ramaswami said.
Finally, Ramaswami expects most organizations leaving VMware to give Nutanix bits and pieces of their stack before making a complete switch — testing the waters, as it were.
“Typically when they do first bring us into an environment, they will give us a small initial lead and then we'll expand over time,” he said.
But, Ramaswami added, “Make no mistake — I'd say it's a significant amount [of] opportunity for us to gain customers and [market] share.”
What about the growth of Nutanix’s partner network as a result of Broadcom’s overhaul of the VMware channel?
Broadcom created a brouhaha in late December when it announced, just days before Christmas, that it would terminate the VMware channel partner program by Feb. 5. Also, that it would take the top 2,000 VMware customers direct, out of the hands of the partners who sold and managed those deals. To be sure, in January, research firm Canalys (a Channel Futures sister company) discovered that 70% of VMware partners were anxious to “dump” Broadcom in the wake of those moves.
For the next few weeks, resellers, other partners and customers swam in a sea of silence from Broadcom. The company’s absence of communication stirred up rumors, fear and uncertainty about how to proceed. VMware competitors jumped on the opportunity to talk up their technologies and partner programs, and many came to the fore with special migration offers. Nutanix ranked among those companies looking to attract VMware partners eager to defect. In April, many managed service providers stand to face big shifts when Broadcom ends the cloud-centric VMware partner program, too.
All that said, Nutanix wants to capitalize on the fallout.
“[It] means the partners want to do more with us and more partners want to come work with us,” Ramaswami said. “I think this is a good outcome for us. We are working very closely with our channel partners, bringing more of them into our fold, enabling them, training them. We’ve also provided some additional incentives for channel partners … to help reward channel partners for bringing new customers over to us.”
Speaking of rewards, though, Broadcom CEO Hock Tan doesn’t appear to be feeling much pain from all the rejiggering of VMware.
Hock Tan, the longtime head of chipmaker Broadcom, seems to have the Midas touch. Well known for operating companies on razor-thin margins and compensating staff through restricted stock units, Tan has a way of making money for shareholders and himself.
Indeed, Tan more than doubled his compensation package last year: His pay soared 164% to nearly $162 million, according to a recent Securities and Exchange Commission proxy filing. Most of that came in the form of stock awards. Tan’s base salary of $1.2 million has not changed in the last three years.
Reuters noted that the amount of Tan’s latest pay package tallies out to more than 510 times the median salary of Broadcom employees.
Tan achieves the gains investors crave by being methodical and, in some views, ruthless about his decisions. As one example of that, Tan, upon the VMware closing, directed Broadcom to put Carbon Black up for sale.
But that’s now on hold.
Last December, after wrapping the VMware purchase, Broadcom announced it would get rid of the “non-core” VMware end-user computing unit and Carbon Black, the security vendor VMware bought in 2019.
Earlier this week, Broadcom confirmed the sale of EUC to private equity firm KKR — and then, per multiple reports, put the sale of Carbon Black on hold.
In fact, it looks as though Broadcom might abandon its sale plans altogether for Carbon Black. Apparently, Broadcom had hoped to tie Carbon Black into the EUC sale. But, according to Bloomberg, “indications of interest … fell short of Broadcom’s expectations.”
What happens next remains the question.
TheLayoff.com is rife with commentary about layoffs taking place last week with more to come in March and April. None of that is confirmed; Broadcom did not immediately respond to Channel Futures’ request for information about the reported job cuts.
Broadcom-VMware observers are speculating that Broadcom may fold parts of Carbon Black into Symantec and jettison the remaining products and people.
Last December, after wrapping the VMware purchase, Broadcom announced it would get rid of the “non-core” VMware end-user computing unit and Carbon Black, the security vendor VMware bought in 2019.
Earlier this week, Broadcom confirmed the sale of EUC to private equity firm KKR — and then, per multiple reports, put the sale of Carbon Black on hold.
In fact, it looks as though Broadcom might abandon its sale plans altogether for Carbon Black. Apparently, Broadcom had hoped to tie Carbon Black into the EUC sale. But, according to Bloomberg, “indications of interest … fell short of Broadcom’s expectations.”
What happens next remains the question.
TheLayoff.com is rife with commentary about layoffs taking place last week with more to come in March and April. None of that is confirmed; Broadcom did not immediately respond to Channel Futures’ request for information about the reported job cuts.
Broadcom-VMware observers are speculating that Broadcom may fold parts of Carbon Black into Symantec and jettison the remaining products and people.
The Broadcom-VMware saga continues to unfold.
This week, some notable developments transpired. First, Broadcom announced the sale of the VMware end-user computing unit to KKR, a private equity firm. Then, unanticipated news arose about Carbon Black. From there came word of CEO Hock Tan’s new compensation package. All of that emerged as key VMware rival Nutanix unveiled its latest round of earnings, which many industry observers expected would reflect momentum from VMware migrations. Channel Futures got some one-on-one time with CEO Rajiv Ramaswami, who had a lot to say.
Let’s dive in.
To start, Broadcom shedding VMware EUC was no surprise. Broadcom said in December after closing the $61 billion VMware purchase that it would offload EUC and Carbon Black. VMware bought the latter, a security vendor, in 2019, but Hock Tan, head of Broadcom, considered both EUC and Carbon Black “non-core” distractions. What’s happening with Carbon Black now, though, does come as a bit of a surprise.
But first, Channel Futures takes a look at the ripple effects of the Broadcom-VMware deal on competitors. On Wednesday, Nutanix, largely considered the most viable full-stack VMware alternative, released its latest earnings. While the numbers reached new heights, they do not yet reflect the full scope of possible new revenue the company can gain from the Broadcom-VMware upheaval. There’s no doubt, though, that Rajiv Ramaswami, Nutanix CEO, is bullish on those prospects.
Ramaswami spoke with partner-focused media on Feb. 28 after Nutanix went live with its fiscal second-quarter earnings ($565 million in revenue, a 16% increase).
“All the actions of Broadcom have created a significant multiyear opportunity for us to win customers, new customers, to gain market share,” Ramaswami said.
In the slideshow above, we go into detail with Ramaswami about Nutanix’s ability to capitalize on the Broadcom-VMware channel fallout. We also share his thoughts on why Nutanix might have to wait a while to realize serious revenue from its rival’s strategies.
But there’s one person who’s not waiting to see more money as a result of the Broadcom-VMware transaction, and Broadcom’s business strategies overall. That person is Hock Tan, CEO of Broadcom, who Channel Futures this month names its Channel Influencer of the Year. A recent Securities and Exchange Commission filing shows that Tan is now making millions more dollars at a jaw-dropping percentage increase. Get the details — start with the image above.
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