The European Commission has found that Broadcom’s proposed acquisition of VMware could have an adverse effect on competition in the market. A final decision will follow.

The European Commission announces the preliminary results of its investigation into Broadcom’s acquisition of VMware. These are not positive for Broadcom: the committee fears that the acquisition could limit competition in the market. This primarily affects hardware components that work together with the virtualization software from VMware.

Concrete objections

The committee took no chances and thoroughly reviewed the offering and market position of both VMware and Broadcom. After analyzing the market, the focus is mainly on so-called Host Bus Adapter (HBAs) and storage adapters.

EU says there’s a good chance Broadcom will gain an advantage on these components, particularly by giving competitors less access to VMware software. For example, Broadcom hardware itself could always be first compatible with VMware, while the alternative manufacturers with deferred access must follow suit.

Broadcom is a major manufacturer of HBAs and storage adapters. The market for HBAs and storage adapters is described as concentrated. This gives Broadcom a chance to sideline the competition a bit, which would result in higher prices and less innovation.

Final decision

The decision isn’t final yet, but it doesn’t bode well for the planned $61 billion acquisition. An antitrust investigation into the acquisition is also ongoing.

The committee has now forwarded its objections to Broadcom, which will have an opportunity to respond. A final decision is planned for early summer. For its part, Broadcom has already delayed closing the transaction but hopes to close the acquisition before Oct. 30.