Broadcom Inc. is in talks to acquire cloud-computing pioneer VMware Inc., which would propel the chipmaker into a highly specialized field of software, sources familiar with the situation disclosed.
The conversations are still ongoing, and there is no assurance that they will result in a purchase, said the people, who requested anonymity because the topic is confidential.
VMware is currently valued at more than $40 billion. The prospective deal price would be greater, assuming a standard premium, but the terms under discussion could not be finalized.
Broadcom Chief Executive Officer Hock Tan, who has established one of the largest and most diversified companies in the chip making sector, would extend his streak of acquisitions with this deal.
Broadcom's 2018 acquisition of CA Technologies and Symantec's 2019 takeover of its corporate security unit indicate that software has been a major focus in recent years.
A Broadcom spokesperson was unavailable for comment. A VMware official declined to comment.
After the Bloomberg News report, Wells Fargo analysts noted, "Investors have been more concerned on Broadcom's desire for another strategic or platform enterprise software purchase, especially given the recent reduction in software value."
An acquisition of VMware would make strategic sense, in consonance with Broadcom's emphasis on expanding its enterprise infrastructure software strategy, according to the analysts.
Broadcom manufactures a vast array of electronic components, including components for the iPhone and industrial equipment. However, data centers have become a vital source of growth, and the company's increased software inventory gives it more methods to target this market.
Prior to this, Broadcom was in discussions to acquire SAS Institute Inc., a privately held software company valued between $15 billion and $20 billion. Last year, though, these conversations concluded without an agreement.
His plan to acquire Qualcomm Inc., a competitor in the chip manufacturing industry, was similarly unsuccessful. In 2018, he was forced to abandon the deal when Broadcom received pushback from the Trump administration.
One concern was the Singapore location of Broadcom's headquarters, but the business has subsequently relocated to the United States. It is now located in San Jose, California, approximately 20 miles from VMware's headquarters in Palo Alto.
VMware, founded in 1998, is a pioneering Silicon Valley startup that has undergone several ownership transitions.
It developed so-called virtualization software, which aggregated applications and workloads on a smaller number of server machines by allowing one server to run several applications.
