Chipmaker Broadcom in talks to acquire VMware

Broadcom Inc. is in talks to acquire cloud-computing company VMware Inc., according to people familiar with the matter, setting up a blockbuster tech deal that would vault the chipmaker into a highly specialized area of software.

The discussions are ongoing and there's no guarantee they will lead to a purchase, said the people, who asked not to be identified because the matter isn't public. 

VMware currently has a market valuation of about $40 billion. Assuming a typical premium, the potential deal price would be higher, though the terms under consideration couldn't be learned.

The transaction would extend a run of acquisitions for Broadcom Chief Executive Officer Hock Tan, who has built one of the largest and most diversified companies in the chip industry. 

Software has been a key focus in recent years, with Broadcom buying CA Technologies in 2018 and Symantec Corp.'s enterprise security business in 2019.

A representative for VMware declined to comment. A representative for Broadcom wasn't available for comment.

In March, Tan told analysts on a post-earnings call Broadcom had the capacity for a "good size" acquisition.

Broadcom makes a wide range of electronics, with its products going into everything from the iPhone to industrial equipment.

But data centers have become a critical source of growth, and bulking up on software gives the company more ways to target that market.

Broadcom was previously in talks to acquire SAS Institute Inc., a closely held software company valued at $15 billion to $20 billion. But those discussions ended last year without a deal.