Broadcom deal for VMWare faces additional UK scrutiny

The regulator said Broadcom had five working days to address its concerns. Photo: Gabby Jones/Bloomberg

Paul Sandle and Muvija M

Britain’s competition regulator said US chipmaker Broadcom’s acquisition of VMware could make servers more expensive, and it would refer the $61bn (€60bn) deal to an in-depth inquiry unless its concerns were addressed.

Broadcom agreed to buy the cloud computing and virtualisation company last year to diversify into enterprise software.

Britain’s Competition and Markets Authority (CMA) said on Wednesday the deal could dampen innovation and drive up the cost of computer parts and software for servers.

“Servers are a vital building block, functioning largely thanks to hardware products made by firms like Broadcom, working in unison with virtualisation software from firms like VMware,” said CMA Executive Director David Stewart.

“We are concerned this deal could allow Broadcom to cut out competitors from the supply of hardware components to the server market and lead to less innovation at a time when most firms want fast, responsive, and affordable IT systems.”

The regulator said Broadcom had five working days to address its concerns, after which it would decide within a further five days whether to refer the deal to an in-depth investigation.

Broadcom said it was working constructively with the CMA and it was confident it would address any concerns.

“We will demonstrate that the transaction enhances competition and benefits businesses and consumers through increased quality, innovation and choice,” a spokesman said.