The $69B bet against replacement

The Cloudcast

Let’s dig into the mindset behind the VMware price increases that have been happening since Broadcom acquired the company in 2023.

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SHOW NOTES:

• What VMware might look like under Broadcom (Eps.629, June 2022)
• What to do about VMware (Day Two Cloud, Feb 2024)
• VMware 10X Price Increase Leaves Companies Looking for Alternatives
• VMware pricing in the Broadcom Era

BROADCOM IS FITTING VMWARE INTO THEIR BUSINESS MODEL

• At least with acquisitions, Broadcom has a well-defined set of business metrics they expect from their companies
• Broadcom acts somewhere like private equity in terms of investment, innovation, revenue generation

IT'S A BOLD STRATEGY BROADCOM, LET’S SEE IF IT PAYS OFF FOR THEM

• In essence, the bet is that there is no replacement for VMware in the Enterprise
• The timing is interesting with the shifting of budgets for AI projects
• It puts customers in a position to pay more for limited upside, but having to distinctly cut other areas of their technology budget (risk the business)
• Customers have some options, but again they risk the business (e.g. hold off on security patches)
• Once a company accepts the new pricing, what guarantees are there about no additional big increases in the future?
• How much will this impact the longer-term vendor-customer relationship?

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