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Broadcom to focus VMware on enterprise cloud, sees $50 billion FY2024 revenue
© Reuters.
SAN JOSE – Broadcom (NASDAQ:) Inc. is setting a new course for VMware (NYSE:) with a strategic pivot towards enterprise cloud services, as the company looks ahead to a robust fiscal year 2024 with anticipated revenues of $50 billion. This shift comes in the wake of its $61 billion acquisition of VMware on November 23, which has sparked significant restructuring within the organization.
On the earnings call today, Broadcom CEO Hock Tan discussed the post-acquisition challenges, including layoffs and the departure of a key executive. Despite these hurdles, Tan provided a positive outlook for IT spending growth, citing an 8% global increase forecasted by Gartner for 2024. With VMware’s integration, Broadcom expects to see substantial contributions from both VMware and semiconductor solutions to its revenue stream. Particularly noteworthy is the projection that AI-related sales will make up more than a quarter of semiconductor revenues.
However, Tan’s strict return-to-office mandate has been a point of contention. VMware staff located within a 50-mile radius of an office are now required to work onsite unless they demonstrate exceptional performance, a move intended to optimize the utilization of the Palo Alto campus.
Earlier speculations about the impact of Broadcom’s acquisition on VMware’s culture and employee retention have been fueled by the recent exit of VMware’s CEO and President. Analysts have pointed out the importance of human factors in mergers and acquisitions, drawing parallels to layoffs following Broadcom’s previous acquisitions of CA Technology and Symantec (NASDAQ:).
As part of the ongoing changes, VMware anticipates reducing its workforce significantly, with over 2,800 job cuts expected by the end of January 2024. These developments occur against the backdrop of a projected compound annual growth rate of 16% in global enterprise cloud spending by 2026, according to GlobalData. This growth underscores the critical importance of maintaining the intrinsic value and stability of companies like VMware during such transitions.
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