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EU investigates Broadcom over VMware licencing

by on16 April 2024

Watchdog barks

US chipmaker Broadcom is facing scrutiny from EU antitrust regulators over changes to the licensing conditions of its newly acquired cloud computing firm VMware, following grievances from several EU business users and trade associations.

On the day Broadcom announced the licensing alterations, a spokesperson for the European Commission told Reuters that the antitrust watchdog had sought details from Broadcom to investigate the issue.

The spokesperson stated, "The Commission has received information suggesting that Broadcom is altering the terms of VMware's software licensing and support."

Last month, the trade group CISPE (Cloud Infrastructure Services Providers in Europe) implored European regulators, legislators, and the judiciary to examine Broadcom's conduct closely.

CISPE, which includes Amazon and 26 smaller EU cloud providers, raised alarms about Broadcom unilaterally rescinding license terms for essential virtualisation software.

The group warned that Broadcom's actions could jeopardise the viability of many CISPE members relying heavily on licensing and utilising VMware products. CISPE revealed that numerous members had expressed that without the ability to license and use VMware products, they would swiftly face insolvency and closure.

Some CISPE members disclosed that over 75 per cent of their turnover depends on VMware's software virtualisation technologies.

"End customers, from large national champions and public sector services to SMEs and start-ups, have reported that they cannot provide some or all of their online services if this licensing issue remains unresolved. In certain instances, these services include critical medical services," the group highlighted.

CISPE noted that VMware commanded nearly 45 per cent of the virtualisation market in 2023, granting Broadcom considerable sway over contract terms, product availability, and the selection of third-party vendors authorised to offer these services.

Last month, the Belgian business user association Beltug, along with its French counterpart Cigref, CIO Platform Nederland, and VOICE Germany, expressed their apprehensions about abrupt shifts in Broadcom's policies and practices to EU industry head Thierry Breton, EU antitrust chief Margrethe Vestager, and Commission president Ursula von der Leyen.

The collective grievance accused these changes of leading to significant price hikes and alterations in license bundling. Moreover, they resulted in a prohibition on license resale and a refusal to maintain security conditions for perpetual licenses.

Broadcom finalised its €64.83 billion acquisition of VMware in November last year, overcoming substantial regulatory challenges globally.

The European Commission sanctioned the deal after Broadcom offered solutions to address concerns regarding competitor Marvell Technology. Furthermore, the UK's Competition and Markets Authority endorsed the acquisition after an extensive review.

In December, Broadcom halted the sale of perpetual licenses for VMware products, aiming to transition VMware into a subscription-based enterprise.

The impacted offerings included VMware products such as Cloud Foundation, HCX, NSX, Site Recovery Manager, vCloud Suite, vSAN, vSphere, Aria Suite, Aria Automation, Aria Universal, Aria Operations, Aria Operations for Networks, and Aria Operations for Logs.

On the day the EU disclosed its probe, Broadcom announced revisions for VMware clients to counteract criticism over changes to VMware's licensing terms, which had been widely unpopular.

Broadcom CEO Hock Tan stated in a blog post: “We have significantly lowered the cost of VCF (VMware Cloud Foundation) to encourage customer uptake."

He further mentioned that Broadcom would unify its pricing metric across cloud providers to a per-core licensing model, now priced at half of the former list price.


Last modified on 16 April 2024
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