Front Broadcom Stingray PS225 H16
This is one of the most interesting acquisitions we have seen in years. Broadcom (formerly traded with the Avago symbol that Broadcom bought) is traditionally a hardware player that will become a great software player overnight. This is part of the company’s shift to enterprise software after the purchase of CA Technologies. It also follows a fairly predictable plan for company leadership.
Broadcom agrees to purchase VMware
Although the company is now Broadcom, it used to be Avago. Many long-time readers know that we’ve been chronicling Broadcom / Avago’s business practices for a long time, even until 2016 in the business side of the PLX acquisition: impediment to NVMe everywhere. Following Qualcomm’s failed offer from Broadcom in 2018 due to antitrust concerns, the company turned to add business software. The company bought CA Technologies and Symantec’s enterprise security business, now building a software unit that VMware will adapt to.
Many of the hardware industry we cover know the Broadcom-Avago game plan. They buy companies like PLX that manufactures PCIe switches. These are usually the best components in markets with few or no competitors (Microchip is probably Broadcom’s largest competitor in the PCIe switching space). In these low-competition markets, Broadcom raises prices and also imposes heavy burdens on hardware companies where supply or prices are reasonable. they are detained.
This is not just done with small server builders. A great example where we saw it to the detriment of the customers we saw in our piece An important change of HPE ProLiant DL325 Gen10 from our review. Here, at the top center of the photo, you can see the pads and screen printing for the 1GbE NIC “BCM5719”. On the right, you can see a complementary Intel i350-t4 NIC. This may seem confusing.
HPE ProLiant DL325 Gen10 Gen2 with De Pop Broadcom NIC and Intel I350 FlexLOM Slotted
Here is the same area of the previous generation (but with the PCIe vertical platform installed). You can see the NIC here:
HPE ProLiant DL325 Gen10 Gen1 with Broadcom NIC and FlexLOM Open
What happened to prevent HPE from installing the designed Broadcom 1GbE driver is that Broadcom raised prices several times in a fairly commodity part for HPE servers. Four-port 1 GbE NICs are 4 Gbps at a time when 200 Gbps NICs were available, making them relatively low-value NICs on many servers. The value of these NICs is that Broadcom was designed in the ProLiant Gen10 line. The option for HPE at the time was to capitulate and pay higher prices or do what we see in the picture above and move the NIC to an add-on card with an Intel driver. We much prefer the Intel i350 to the Broadcom chips in this line, but that was not the point. Instead, the expansion slot was to be used for an additional NIC and could not be used for higher speed NICs. We had been deploying these servers with 40 GbE dual port NICs in this slot and we could not on this server due to Broadcom’s move.
Not only was a massive price increase in a designed part a nuisance for HPE and many of HPE’s customers, but it also meant that another PCB had to be added to keep costs reasonable. Given the focus on environmental awareness, adding another PCB is not what we would like to see. From the rumors we heard, keeping the Broadcom chip, considering the prices and margins of HPE, would probably have meant a price increase of more than $ 100 for the servers, even the low-end models that are they sell for between $ 1,000 and $ 1,300. This is on a relatively low value chip. The Intel i350 at the time was in the middle of $ 20.
While this may seem like an isolated case, we’ve heard stories like PCIe switches getting three times more expensive overnight after acquiring PLX, and to this day, server makers often tell us about heavy business practices. of Broadcom. These have gone beyond PCIe switches and NICs and even with things like LSI drivers after this acquisition.
This is the company that is buying VMware. While we’re talking about hardware locking because it’s designed, VMware customers should be very careful. Broadcom’s playbook is to drive a higher price in its acquisitions and in its entire portfolio for customers with little ability to change, as with HPE server NICs. Companies that use VMware today have high switching costs, so Broadcom probably knows that it can sell the same software and support for more without many companies leaving.
Final words
For Michael Dell and many of those who will have a liquidity event with the purchase of VMware, this is a great day. For VMware customers, it may be worth considering contingencies if prices go up. Rising prices may be good, but from the perspective of the server hardware industry, VMware customers should expect this under new leadership. Get ready for a big change in the industry.