Is Broadcom going downhill with its VMware measures? Silent layoffs and CISPE calls for EU measures

[German]Are we currently witnessing how Broadcom is driving virtualization specialist VMware downhill? Instead of earing huge revenues, the vendor will eventually be faced with a shambles? I have often reported on the trials and tribulations of Broadcom's management. Now I have come across the fact that many VMware employees with US visas are at risk of losing their jobs, which could mean a loss of around 40% of the workforce. And the European cloud operators' association CISP is calling for the EU to intervene because it believes the business of cloud providers and customers who use VMware products is under threat. The background to this is the termination of long-standing contracts by Broadcom, together with new contracts that result in massive price increases.


They smell Dollars, I smell trouble

In the blog post Broadcom acquires VMware for 61 billion US-$, I reported in 2022, that Broadcom had bought the virtualization specialist VMware for the crazy sum of 61 billion US dollars. Broadcom is a semiconductor company based in San José, California, which was the semiconductor product division of Hewlett-Packard and later Agilent before its spin-off. Founded in 2005, the company has 19,000 employees and 2019 annual sales amounted to 22.5 billion US dollars. Broadcom has been acquiring various security and software companies for some time.

In the meantime, VMware has become part of the portfolio and since the end of 2023, when the deal was finalized, it has gradually become clear what this means for employees, partners and customers. VMware OEM partners have been terminated (see Contracts for all VMware partners terminated by Broadcom for 2024) and customers are being forced to switch to subscription models and cloud contracts for VMware virtualization products (see Broadcom ends perpetual licenses for VMware products – End of the free ESXi server?).

The bottom line is that this means a serious cost increase for customers (see VMware product portfolio: Licensing internals; and Lenovo has been out since Feb. 27, 2024). I have reported on these connections and the consequences several times here in the blog (see article links at the end of the post).

At the analyst conference, Broadcom's CEO was still expecting revenues in the "double-digit percentage range from quarter to quarter until the end of the financial year", but the first "skid marks" are now becoming visible. I hinted at this in the blog post VMware by Broadcom: "Things are not going well with the Broadcom plans" – many customers will switch to alternatives as soon as they can.

Secret firings?

It has probably gone unnoticed by the general public, but there is likely to be a bloodletting of employees at VMware in 2024, which will mainly affect employees with visas. A blog reader pointed this out to me via X in a private message. The following tweet sums it up very precisely.


Entlassungen bei VMware

At the end of February 2024, there were indications that Broadcom had made "quiet layoffs without much notice" among the VMware workforce. All VMware employees who have a work visa for the USA have received a notice of indirect termination of employment. A VMware employee shared the information on He had received an email that his visa would no longer be extended. The person concerned sees the options of either returning directly to his home country and working for VMware from there, or considering his employment relationship terminated when his visa expires.

It's said that about 40 percent of VMware developers in the US have some sort of visa/work permit. On, the thread starter concludes that this means that these employees will no longer be around at the end of 2024 (because the work permits expire). The person concerned writes that the visa holders were not informed of this when they were hired by VMware.

Another user writes that the visa situation in the USA is difficult at the moment. The poster's company was taken over by Broadcom 4 years ago. At that time, a few dozen engineers were sponsored and persuaded to move from India to the USA. When people had to extend H1B visas this year, several people involved found that the extension was not granted. The person believes that these people will move to Canada once the original visas expire. All in all, this leaves a sword of Damocles hanging over about 40% of VMware developers – not a good situation in my eyes.

Cloud operators' association CISP calls for intervention

Broadcom's move to force its customers from purchasing licenses to subscription solutions and the cloud is causing major disruption in the virtualization market. Many customers are discovering that virtualization using VMware products is leading to a sharp increase in costs. Providers who offer virtual machines and cloud services are seeing their business models float away. On the one hand, Broadcom is looking to make massive amounts of money with the new license subscriptions. On the other hand, the providers are tied to customer contracts and cannot pass on the costs.

The European cloud operator association CISPE describes Broadcom/VMware's new licensing policy as "brutal". CISPE is a non-profit trade association for Infrastructure-as-a-Service cloud providers in Europe. It was launched to help IaaS providers explain their business model to policy makers.

In a press statement Broadcom's brutal contract termination and imposition of prohibitive new licensing terms will decimate Europe's Cloud Infrastructure dated 19 March 2024, the association railed against the new licensing conditions. The US technology giant Broadcom unilaterally terminated all licenses for VMware software following its takeover of the company last year.

Cloud service providers and customers are facing a shambles, it is said, as it is not clear how, when and whether they will be able to license VMware software from April 1, 2024. Customers have reported price increases of up to twelve times, even if they are invited to re-license VMware software. This mirrors what I have already reflected in the posts linked at the end of this article here on the blog.

According to CISPE, cloud services that are essential to public and private sector organizations, including local governments, hospitals and universities, as well as commercial enterprises, could go offline within two weeks (that would be Broadcom's April Fool's Day 2024). In its press release, CISPE calls on regulators, legislators and courts across Europe to swiftly review Broadcom's actions in unilaterally removing license terms for key virtualization software.

Cloud customers, including public sector organizations, large European enterprises, SMEs and start-ups, are all threatened by outrageous and unjustified new contract terms and price increases, it says. At the very least, CISPE is calling for an immediate suspension of contract terminations and the ability for customers to opt out of the multi-year contract imposed by Broadcom as soon as viable alternatives are available.

Several CISPE members have stated that without the ability to license and use VMware products, they will quickly go bankrupt and go out of business. Some state that over 75% of their revenues depend on VMware software virtualization technologies. End customers, from large national companies and public sector services to SMEs and start-ups, state that they will not be able to deliver some or all of their online services if this licensing issue is not resolved.

In some cases, these are vital medical services, writes the CISPE. Ultimately, citizens would be deprived of everyday, cost-effective cloud services and Europe's digital ambitions would be seriously damaged. Well, you can argue about the latter statement, there is no right to "cost-effective cloud services" and "Europe's digital ambitions" can also be smeared on your hat.

However, the case shows what kind of waves Broadcom's management decisions can cause. The fact that Broadcom believes it can get out of multi-year contracts without consequences could have serious legal repercussions if the contracts do not provide for this special termination. I know from blog readers that legal departments there have been instructed to take action against Broadcom. The legal clarification is likely to take years, but the companies need clarification by April 1, 2024. This is likely to lead to distortions.

Similar articles:
Broadcom acquires VMware for 61 billion US-$
Broadcom plans to sell VMware end-user computing and carbon black businesses
Contracts for all VMware partners terminated by Broadcom for 2024
VMware OEM portal offline, customers cannot activate VMware licenses
Broadcom ends perpetual licenses for VMware products – End of the free ESXi server?
Statement from Broadcom on issue after Symantec acquisition
Symantec acquisition by Broadcom ends in license/support chaos
After discontinuation: VMware Player, Workstation and Fusion seems to remain
Microsoft survey on virtualization: Migration from VMware
Private equity firm KKR buys VMware end customer business for 4 billion dollars
VMware product portfolio: Licensing internals; and Lenovo has been out since Feb. 27, 2024
VMware by Broadcom: "Things are not going well with the Broadcom plans"
Bye, bye VMware ESXi: Field report on the migration to Proxmox

Cookies helps to fund this blog: Cookie settings

This entry was posted in Virtualization and tagged , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *