Broadcom is taking a short-term “private equity mentality” to its VMware acquisition, stripping everything down to bare essentials, and milking its existing customers, a former employee that worked with partners and was impacted by the acquisition told Silverlinings on a phone call.
Broadcom had claimed it would handle the VMware acquisition differently than its previous buyouts of CA Technologies and Symantec. It seems, however, to be following a familiar playbook.
As we’ve already seen since the $61 billion deal was completed, Broadcom has slaked off VMware resellers making less than $500,000 in sales a year, and taken VMware’s top 2,000 customers directly under its wings.
“Taking customers direct and cutting out the partners is really an unscrupulous move that is almost unheard of,” the former employee claimed.
He said he’d never seen a company come in and disrupt the partner program like Broadcom has with VMware.
“They’ve got captive customers, they know that it can take them easily a year to two years to get off the server virtualization,” the ex-employee said.
The employee we spoke to had worked with VMware’s partners as part of the vendor's software-defined edge (SDE) unit, which takes in SD-WAN, software-as-a-service (SaaS), edge and telco radio access networks (RAN). Now, “the team I was on has pretty much gone,” he said.
VMware bought into the SD-WAN space in 2017 and Broadcom is continuing with the SDE division as one of its four business units going forward.
Other units that Broadcom is plowing ahead with include VMware Cloud Foundation (VCF) which sells virtualization bundles to VMware’s top customers, the Tanzu (TNZ) unit for application modernization as well as the ANS data center unit.
“By streamlining the VMware partners and customers that they work with along with the move to subscription-only, Broadcom's bet is that the potential drop in revenue is offset by the reduction in costs resulting in increased profitability and perhaps agility,” Roy Chua, analyst at AvidThink told us.
However, it plays out, it will be a bumpy year ahead for VMware executives, workers and former employees, of which there are nearly 3,000 on the market right now.