The Six Five team discusses the UK’s concern with Broadcom & VMware’s new deal.
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Transcript:
Daniel Newman: Let’s take this home and let’s talk a little bit about the UK Competition Authority. Coming back, second level probe, it’s called the UK Competition Markets Authority expressed its concern this week, I think it was two or three days ago, that there could be more expensive servers for UK businesses. So they’re basically saying that this deal could enable Broadcom to cut out competition from supply of certain hardware components. And this could slow innovation. Boy. So this is a pretty fast turn. They gave five days for them to respond to this. And by the way, this is not the only probe. The EU had a probe as well. I think the really interesting question here, Pat, is Broadcom does have some very critical components that are in a lot of servers. Customers have a lot of choice. And what I’m not quite sure about is what is the specific VMware role to play? Meaning Broadcom could always play the card of making some of their – that’s always been their ethos is they buy these component companies that have very limited competition and they become the biggest supplier of certain network or certain components that go into compute and others’ infrastructure devices.
But the VMware thing frustrates me because they keep saying harming rival and choices and is it a nick or what is it going to be? But the fact is there’s so much choice these days for how you would go about virtualization. There’s so many different hardware options, there’s so many different hyperscale cloud options now. You’ve got open source options, you’ve got Red Hat, you’ve got SUSE, you’ve got lots of different ways to do the VMware thing and it’s no longer… Yes, the one thing is there is a huge installed database of VMware customers that maybe would not prefer in this moment to have to pivot to a different architecture. But Pat, I guess what kind of gets me, and maybe I’m going to try to keep this short ’cause we’re a little bit tight on time and we’re at the end of the show, but Pat, of all the things that regulators could be probing, is this the thing, is this really a good use of our regulator’s time when it comes to how consumers are being harmed by things like high fees in app stores that literally are costing them money?
I just can’t see how Broadcom, the specific acquisition of VMware reduces choice in any substantial way where a customer can’t move off or Broadcom as a punitive result, meaning they move off VMware. So if Broadcom uses this to shoot more hardware, to win more server sales, they’re going to lose VMware customers. And so this cycle is brutal to me and I just don’t see it. So maybe I’m oversimplifying it a little bit but because we’re a little short on time, I want to give you the last word Pat. I don’t agree with it, I don’t get it. This deal for all contents purposes should move forward. Dell already owned them and didn’t do anything like this notably with it. I don’t see it being any different here.
Patrick Moorhead: If there’s nothing more than I have picked up from interacting with the senior leadership at Broadcom, is that they’re business people and they’re going to go where the profit dollars are and doing something like limiting Broadcom only nicks to the VMware stack would absolutely be business. I called it business suicide in my article that I wrote about the EU. You make a hundred X more on a VMware license than you do on the profit dollars on a nick, a cheap nick, okay. That would be dumb. VMware also makes more of its money on historical hardware and supporting that than they do the new stuff on their licenses. So that would be dumb. So that’s my reason number one. And the second, and you hit on that, there’s a ton of competition. There is literally an industry of people out there – do the search on it – of replacements for VMware or ways to get off of VMware and go to KVM, go to Zen, or go to HyperV, makes migration pretty darn easy.
So people go other ways. And the third thing is you have to understand why Broadcom is buying VMware. And that’s for the hybrid multi-cloud opportunity. It’s to have the application and potentially the security and networking with NXX fabric for the future of the hybrid multi-cloud. So go where the money is and also just put a decree out there if you want, as opposed to slowing this thing down in terms of accessibility. So I’m going to leave it there Daniel, but check out my Forbes article in the show notes. I’ll put that in that I added on the EU which translates to the UK’s CM.
Daniel Newman: Yeah, I had a good LinkedIn debate going, some very good insights to both sides of this debate. It is always more complex. I just can’t help but wonder what regulators are really – how we get hyper focused on something like this and then we just miss, just glaring antitrust infringements.
Patrick Moorhead: I mean the way that Apple has dominated and used its monopolistic practices, it barely gets a nod.
Daniel Newman: It harms like real everyday people because this is at the very edge of consumer, which is really what this was set up to do. Not to protect large profitable companies being more profitable. That’s just not ever been the thing. So we can play both sides of the capitalism, but this one befuddles me. By the way, we’re going to maybe have another one of these topics next week ’cause it looks like Arm is changing its business model Pat, and potentially changing the way it’s going to license. And this could get really interesting with its impending IPO. It’s ongoing lawsuit with Qualcomm. So that’s going to be one to watch. Not going to hit it now. Not going to talk about it now, but let’s put that on the list.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
