Broadcom is buying VMware in a $61 billion mega-deal

Broadcom isn’t done attempting major acquisitions. The chip giant is buying cloud- and virtualization-focused software developer VMware for the equivalent of $61 billion in cash and stock. The move would fold Broadcom’s software division into VMware and create a theoretical powerhouse that helps companies run apps in all sorts of environments, including “any” cloud service.

The proposed union would have Broadcom take on $8 billion of VMware’s debt. The deal should close sometime in Broadcom’s fiscal 2023 (no later than early calendar 2023) if regulators approve the deal. Notably, though, VMware isn’t yet locked into the merger — a “go-shop” clause will let it consider and even solicit deals from other companies through July 5th.

If the purchase goes forward, it will represent one of the larger tech acquisitions so far. Appropriately, Dell (whose founder sits on VMware’s board) set a record for several years when it bought VMware’s then-owner EMC for $67 billion in 2015. Microsoft eclipsed that, though, with its still-pending $68.7 billion buyout of Activision Blizzard.

A play like this isn’t completely unexpected. On top of its debt, VMware has seen declining profits and modest revenue gains. This could help the firm overcome those hurdles and help its competitiveness. Broadcom may not want to count on the purchase going through, however. Former President Trump blocked Broadcom’s purchase of Qualcomm in 2018 over national security concerns. While the administration and acquisition target are clearly different this time around, it wouldn’t be surprising if Broadcom faces similar levels of regulatory scrutiny.

UK watchdog is investigating whether Google restricts competition in ads

The UK’s Competition and Markets Authority has launched a second investigation into Google’s ad tech practices. This probe, in particular, will look into the role Google plays in the “ad tech stack,” or the set of services that facilitate the sale of online advertising space between advertisers and sellers like online content providers. The organization explained that Google has strong positions at various levels of the ad tech stack and charges fees to both publishers and advertisers. 

It’s examining three key parts of the stack in which Google plays key roles, since it owns the largest providers for each. CMA will examine Google’s practices for demand-side platforms, which give advertisers and media agencies a way to buy a publishers’ space for advertising from many sources. It will also look into the company’s practices relating to ad exchanges that can automate the sale of publishers’ inventory. Finally, the CMA will examine Google’s publisher ad servers that manage a publisher’s inventory to decide which ad to show at a given time based on the bids and direct deals for the space. 

Google’s practices — if indeed questionable — could distort competition, the CMA said. It could contractually tie these various services together, for instance, so users won’t have a choice but to go with Google all the way, making it difficult for smaller rival services to compete. 

According to Andrea Coscelli, the CMA’s Chief Executive:

“Weakening competition in this area could reduce the ad revenues of publishers, who may be forced to compromise the quality of their content to cut costs or put their content behind paywalls. It may also be raising costs for advertisers which are passed on through higher prices for advertised goods and services.”

The organization is also investigating whether Google and Meta colluded over ads. That probe is all about digging into the advertising agreement between the two companies codenamed “Jedi Blue” and figuring out if that deal hinders competition in online advertising. 

Sony vows to ramp up PS5 production to levels ‘never achieved before’

One of Sony’s top priorities going forward is to ramp up production for the PlayStation 5 to meet unprecedented demand for the console. In a briefing with investors (PDF), the company said that it expects to close the gap in PS4 and PS5 sales this year after the newer console lagged behind its older sibling in 2021. Sony blamed the lack of PS5 sales on its inability to build enough units due to ongoing supply chain shortages in its quarterly earnings report. There’s no lack of demand: Based on the data Sony presented, it takes only 82 minutes to to sell 80,000 PS5 units, whereas it takes nine days to sell the same number of PS4s. 

The company now expects to be able to produce more units as supply chain shortages have eased up a bit, but the pandemic’s impact on parts availability still remains a concern. In addition, Sony is worried that the Russian invasion of Ukraine might also affect its logistics and potential parts inventory. To mitigate the impact of those issues, Sony plans to source from multiple suppliers “for greater agility in unstable market conditions.” It also has ongoing negotiations to maintain optimal delivery routes for the console. 

With those solutions in place, the company believes PS5 sales can overtake the PS4’s again starting next year. Sony Interactive Entertainment CEO Jim Ryan said during the briefing that after the initial ramp up, the company is “planning for heavy further increases in console production, taking [it] to production levels that [it has] never achieved before.”

Aside from discussing its PS5 production goals, Sony has also revealed that it’s expanding PlayStation Studios by acquiring more game studios, as well as increasing its investments in live services, PC and mobile offerings. It’s committing to launch 12 live services in the coming years that don’t include Destiny, which will be the company’s as part of its Bungie acquisition. And it intends to have half of its annual first party releases on PC and on mobile by 2025. “By expanding to PC and mobile, and it must be said… also to live services, we have the opportunity to move from a situation of being present in a very narrow segment of the overall gaming software market, to being present pretty much everywhere,” Ryan explained.