VMware stung by defections and layoffs after Broadcom close

No sooner did Broadcom complete its $69 billion acquisition of VMware than the headaches have started. The company is laying off employees, it lost a top executive, and it may lose an awful lot of customers.

Layoffs are inevitable after an acquisition as companies deal with overlap and redundancy. But on top of that, VMware lost its No. 2 executive: Sumit Dhawan, president of the company since 2021, left the firm to become the new CEO of cybersecurity vendor Proofpoint.

Outside the company, there’s concern about customer retention.

Throughout the drawn-out acquisition process, VMware’s enterprise customers have been worried about that the deal might stifle VMware innovation, particularly given Broadcom’s less-than-stellar track record with prior acquisitions (CA Technologies in 2018 and Symantec in 2019).

Now it seems that leeriness could be turning into defection. In a new blog post from Forrester Research, the analyst firm estimates that up to 20% of VMware’s enterprise customers plan to switch to a new virtual machine stack in the coming year.

“The impending acquisition of VMware by Broadcom has cast a shadow on an already beleaguered VMware customer base. Many are exhausted by significant price hikes, degrading support, and forced mandatory subscription to software bundles where some modules such as NSX and Aria Suite/vRealize Suite end up as shelfware,” said authors Michele Pelino and Naveen Chhabra.

“Subsequently, many of VMware’s enterprise clients are exploring alternatives to its virtualization, cloud management, end-user computing, and hyperconverged infrastructure products despite the company’s dominance in these technologies,” they added.

It’s a significant collapse in a short period since Pat Gelsinger departed as CEO to take the helm of Intel. Is there any connection? Charles King, principal analyst with Pund-IT, doesn’t believe so.

“Senior execs typically leave their jobs after acquisitions, so Dhawan’s departure is no surprise. Unfortunately, substantial layoffs also follow the completion of such deals, so, basically, no surprises there, either,” he told me.

King couldn’t speak to the Forrester claims about migrations off VMware, but he doesn’t think Gelsinger’s departure had anything to do with it. “His job was to shape VMware into a standalone company, which he accomplished admirably. In fact, that purchase price is over 100x more than the $652 million that EMC originally paid for VMware in 2004. Pretty remarkable, overall,” said King.