Broadcom CEO ‘Confident’ VMware Deal Will Pass Muster With Global Regulators

‘I cannot and will not comment on any of this as we are working very, very positively and progressively with regulators on all the issues related to our clearance. Sorry I can’t comment, but just to let you know we are making good progress,’ Broadcom CEO Hock Tan tells analysts on the company’s earnings call.

Broadcom Software CEO Hock Tan is confident regulators will bless his $61 billion acquisition of VMware before the semiconductor giant finishes its fiscal year.

That means VMware should be in Broadcom’s stocking before the stores put out Christmas decorations on Nov. 1, if Tan’s bet is correct.

“We believe that the combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era,” Tan said during remarks on Broadcom’s Thursday’s earnings call. “And we are confident regulators will see this when they conclude their review.”

So far the deal has passed muster with regulators in Canada, Brazil and South Africa. But questions remain in three key markets: the U.S., the European Union and the United Kingdom.

“I cannot and will not comment on any of this as we are working very, very positively and progressively with regulators on all the issues related to our clearance,” he told analysts. “Sorry I can’t comment, but just to let you know we are making good progress.”

Tan pointed out during the call that Broadcom has passed foreign investment control clearance in Germany, France, Austria, Denmark, Italy and New Zealand.

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Broadcom’s sales surged 16 percent year over year to $8.91 billion for the quarter ended Jan. 29, a strong showing after other chipmakers have posted softer revenue in recent frames. Intel repoprted sharply lower revenue in its most recent earnings on Jan. 26 with $14 billion in sales, down 32 percent year over year. Last quarter Broadcom surprised analysts with stronger-than-expected earnings of $8.93 billion, up 21 percent.

Semiconductor products drove revenue, Tan said, accounting for $7.1 billion, or around 80 percent of total revenue for the quarter, up 21 percent over the same period last year.

“From our view, infrastructure spending continues to be up particularly among service providers, even as hyperscale and enterprise is sustained,” Tan told analysts. “Spending in technology or infrastructure has been strong, showing double-digit growth for nine consecutive quarters. We continue to be booked for fiscal 2023 and our lead times and visibility on semiconductors remain largely at 50 weeks.”

However, its infrastructure software busienss took a 1 percent dip, which Tan attributed to poor performance of Brocade, a company Broadcom acquired in 2017.

This earnings call follows news that VMware had pushed the “outside date”—the date to walk away from the deal—by 90 days to May 26. On the day VMware filed its announcement, the deadline was one week from expiring.

In the U.S., the Federal Trade Commission opened an in-depth investigation in July that seven months later has not concluded. The European Commission has been the most vocal of the boards weighing the deal. The commission opened its in-depth investigation in December. European Commission Executive Vice President Margrethe Vestager has said authorities there are concerned that Broadcom may turn off its competitors’ access to VMware, should the deal go through.

Historically, Broadcom has a mixed winning record in front of regulators.

The company is under a seven-year global settlement agreement that gives officials with the European Commission access to Broadcom’s sales contracts to ensure it is no longer drafting illegal deals with customers. Those practices landed Broadcom in hot water with the FTC as well, which likewise described the actions as “illegal.”

In 2018, the U.S. Justice Department blocked Broadcom’s acquisition of Qualcomm over national security concerns since, at the time, Broadcom was based overseas. The company has since relocated its headquarters to San Jose, Calif.