European Regulators Challenge Broadcom’s VMware Strategy

European technology companies are facing unprecedented licensing cost increases following Broadcom’s acquisition of VMware, with some reporting fee hikes between 800% and 1500%. The dramatic price changes have triggered formal complaints to European Union authorities, who are now considering whether to reopen their investigation into the massive takeover.

Industry Coalition Sounds Alarm

A prominent European cloud computing organization has formally requested that the European Commission reconsider its initial approval of Broadcom’s VMware purchase. CISPE, representing cloud infrastructure providers across Europe, contends that Broadcom’s revised licensing structure effectively traps customers in long-term agreements with reduced flexibility and significantly higher expenses. According to their filing, technical dependencies and prohibitive switching costs make it virtually impossible for smaller cloud firms to migrate away from VMware’s ecosystem.

The European Cloud Competition Observatory has amplified these concerns, characterizing Broadcom as presenting a “critical threat” to market competition. What initially appeared as a strategic multi-billion dollar acquisition is increasingly viewed as potentially problematic from a regulatory standpoint.

Business Model Overhaul Sparks Backlash

Since completing the VMware transaction, Broadcom has implemented sweeping changes to the company’s operational framework. The technology firm has eliminated perpetual licenses in favor of subscription-based models and substantially restructured its partner program, resulting in numerous authorized partners losing their status.

Should investors sell immediately? Or is it worth buying Broadcom?

While Broadcom maintains these adjustments represent essential modernization efforts, the growing opposition from European regulators marks the most significant challenge to the company’s new strategic direction. The “red warning” designation underscores the seriousness of regulatory concerns.

Mounting Regulatory Pressure

Attention now shifts to the European Commission, which must decide whether to launch formal proceedings. Such an investigation could potentially impact Broadcom’s stock performance, with management expected to address these developments during their upcoming quarterly report in December.

Market analysts continue to view Broadcom shares favorably due to the company’s strong positioning in artificial intelligence chips, but the escalating regulatory scrutiny in Europe introduces a new risk factor. The coming weeks will determine whether Broadcom can navigate these regulatory challenges or face potentially costly legal proceedings.