This is one of the most interesting acquisitions we’ve seen in years. Broadcom (formerly, trading under the Avago ticker symbol that bought Broadcom) is traditionally a hardware operator that will become a major software player overnight. This is part of the company’s shift to enterprise software after purchasing CA Technologies. He also follows a fairly predictable plan to lead the company.
Broadcom agrees to purchase VMware
While the company is now Broadcom, it was previously Avago. Many of our old readers know we’ve chronicled Broadcom/Avago’s business practices for quite some time, even back in 2016 on the business side of the PLX acquisition: NVMe obstruction everywhere. After Qualcomm’s bid by Broadcom failed in 2018 due to antitrust concerns, the company pivoted to add enterprise software. The company bought CA Technologies and corporate security Symantec to build a software module that would fit in VMware.
Much is known in the hardware industry that we cover in the Broadcom-Avago Game Plan. They buy companies like PLX that make PCIe switches. These are usually the best components in markets with few, if any, competitors (Microchip is probably Broadcom’s biggest competitor in the PCIe switching space.) In these low-competition markets, Broadcom raises prices and also places heavy assembly burdens on hardware companies. Where reasonable offer or prices are prohibited.
This is not only done for small server makers. A great example where we’ve seen this at a customer expense we’ve seen in our important HPE ProLiant DL325 Gen10 Change article since our review. Here in the middle of the top of the image you can see the pads and silkscreen of the “BCM5719” 1GbE NIC. On the right, you can see the additional Intel i350-t4 network interface card. This may seem confusing.
Here is the same area as the previous generation (but with a PCIe lifter installed). Here you can see the NIC:
What happened to make HPE not put the Broadcom 1GbE console designed in is that Broadcom raised prices several times on a somewhat commodity portion for HPE servers. 4-port 1Gbps NICs are 4Gbps in an era when 200Gbps NICs are available making them relatively low value NICs in many servers. The value of these NICs is that Broadcom is built into the ProLiant Gen10 line. HPE’s choice at that point was to either give up and pay higher prices or do what we see in the image above and move the NIC to an additional card with the Intel controller. We strongly prefer the Intel i350 processor over Broadcom chips in this line, but that wasn’t the point. Instead, the expansion slot had to be used for a network interface card (NIC) add-on and could not be used for high-speed NICs. We were deploying these servers with dual-port 40Gb NICs in this slot, and we couldn’t on this server due to Broadcom relocation.
Not only was the massive price increase on a designer part a nuisance to HPE, and many HPE customers, it also meant that another PCB had to be added to keep costs reasonable. Given the focus on environmental awareness, adding another PCB is not what we want to see. From the rumors we’ve heard, keeping the Broadcom chip, given the pricing and HPE margins, would likely have meant a bigger $100 increase in the price of servers even lower models that sell for $1,000-$1,300. This is on a relatively low value bracket. The Intel i350 at the time was in the middle of $20.
While this may seem like an isolated case, we’ve heard stories like PCIe switches getting three times more expensive overnight after purchasing a PLX and to this day server manufacturers often tell us about Broadcom’s heavy business practices. This has happened beyond just PCIe switches and NICs and even with things like LSI controllers after this acquisition.
This is the company that buys VMware. As we discuss locking devices due to their design, VMware customers should be very careful. Broadcom’s operating guide is to pay higher prices in its acquisitions and across its portfolio to customers with little switching ability, as is the case with NICs in an HPE server. The companies running VMware today have high switching costs, and Broadcom probably knows they can sell the same software and support for more without having to leave multiple companies.
For Michael Dell and many of those who will be attending a liquidity event with their VMware purchase, this is a great day. For VMware customers, it may be worth considering an emergency if prices go up. The increased prices may be fine but from a server hardware industry perspective, VMware customers should expect this under new leadership. Get ready for a big change in the industry.