VMware Inc (VMW): Investor Discussion

Vmware Inc. - Ordinary Shares - Class A

TMT


Presented:09/20/2023
Price:$165.71
Cap:$71.55B
Current Price:$142.48
Cap:$61.52B

Presented

Date09/20/2023
Price$165.71
Market Cap$71.55B
Ent Value$73.30B
P/E Ratio50.08x
Book Value$5.90
Div Yield0%
Shares O/S431.79M
Ave Daily Vol1,670,837
Short Int1.48%

Current

Price$142.48
Market Cap$61.52B
VMware, Inc. engages in the provision of cloud infrastructure and business mobility. Its products include Software-Defined Data Center, Hybrid Cloud Computing, and End-User Computing. It supports modernizing data centers, integrating public clouds, empowering digital workspaces and transforming security. The company was founded by Diane Greene, Mendel Rosenblum, Scott Devine, Edward Wang and Edouard Bugnion in 1998 and is headquartered in Palo Alto, CA.

On September 20, 2023, DeMatteo Research hosted a discussion on Broadcom Inc (AVGO)’s acquisition of VMware Inc (VMW) with five investors. The investors shared thoughts regarding ongoing regulatory scrutiny, the timeline of the deal closing, the outlook for the pro forma company, and VMW’s standalone value if the deal breaks. Overall, there was confidence that the deal will be approved and will be accretive to AVGO, but there could be downside risk from AI dilution and selling pressure from existing VMW shareholders.

Publicly traded companies mentioned herein: Broadcom Inc (AVGO), Marvell Technology Inc (MRVL), VMware Inc (VMW)

Deal Approval & Closing Date

One participant started the discussion by explaining his confidence that the deal will close, noting that it has already been approved by CMA in the UK and HSR in the US, meaning that the only remaining regulatory hurdle is SAMR in China. He acknowledges that Chinese approval is a bit of a “black box,” which explains the current spread, but it seems like AVGO is in the later innings of negotiating behavioral remedies. In his view, the antitrust concern that this combination would foreclose Broadcom’s main competitor, Marvell, is unfounded. The investment thesis for AVGO’s acquisition was to buy a monopoly with a bloated cost structure, allowing AVGO to cut costs and take price. It wouldn’t make sense to foreclose on a large VMW customer, MRVL, because that defeats the purpose of buying a scaled monopoly. Additionally, he doesn’t think trade secret concerns make sense as these are largely commoditized chips without much innovation. 

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Idea Discussion

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