The European Commission has opened an in-depth investigation to assess the proposed acquisition of enterprise Cloud software company VMware by Broadcom.
VMware was acquired by chip and software maker Broadcom from Dell Technologies for $61 billion in May this year.
The Commission said it is particularly concerned that the “transaction would allow Broadcom to restrict competition in the market for certain hardware components which interoperate with VMware’s software”.
This, in turn, could lead to higher prices, lower quality and less innovation for business customers, and ultimately consumers.
“Broadcom may start bundling VMware’s virtualisation software with its own software (namely mainframe and security software) and no longer offer VMware’s virtualisation software as a stand-alone product reducing choice and potentially foreclosing rival software providers,” said the commission.
The Commission now has 90 working days, until May 11 2023, to make a decision.
In September, the US Securities and Exchange Commission (SEC) charged VMware for misleading investors by obscuring the company’s financial performance.
VMware allegedly misled investors about its order backlog management practices, which enabled the company to push revenue into future quarters by delaying product deliveries to customers.
“As the SEC’s order finds, by making misleading statements about order management practices, VMware deprived investors of important information about its financial performance,” said Mark Cave, Associate Director in the Division of Enforcement.
VMware posted $3.21 billion in revenue for the third quarter this year — an increase of 1 per cent from the third quarter of fiscal 2022.