Broadcom pauses sale of Carbon Black as EUC deal goes through

A potentially $1 billion deal by semiconductor manufacturer Broadcom to sell a security software business it acquired with its $61 billion purchase of VMware last year has reportedly been put on hold, if not abandoned.

Investment firm KKR had agreed to buy Carbon Black along with VMware’s entire end-user computing (EUC) business, including VMware’s Workspace ONE and Horizon offerings, in a deal valued at about $4 billion. However, when Broadcom finalized its $3.8 billion transaction with KKR to sell the EUC business late on Monday, Carbon Black was not a part of that agreement, according to a published report by Bloomberg.

The reported cited “indications of interest” that “fell short of Broadcom’s expectations” as the reason the deal to sell the security business did not go through. It’s unclear if Carbon Black remains on the market, though it’s likely Broadcom still is seeking to offload the unit, as its CEO Hock Tan said back in December that the company wanted to divest non-core divisions of VMware. Broadcom did not immediately respond to a request for comment on Tuesday.

Carbon Black originally was founded as Bit9 in 2002, then morphed into Bit9 + Carbon Black in 2014 when Bit9 bought the then startup security firm. The name was changed to just Carbon Black in 2016, and in 2019 VMware acquired the company, which specializes in endpoint security software, for $2.1 billion.

Shedding excess products

Carbon Black became part of Broadcom last year upon its acquisition of VMware, and according to Tan’s plan, the company has since been shedding products acquired in the deal, often to the dismay of customers. In fact, Broadcom’s purchase of VMware was never popular with the industry; though it ultimately was approved by regulators, the process wasn’t without scrutiny from a number of competition regulators across the globe, including in the UK and the EU.

When asked bout the reasons behind divesting VMware’s EUC and Carbon Black divisions in particular, Tan had said that although both were good assets, the company didn’t want to be “distracted” by non-core parts of its business and wanted to focus on those divisions where it saw “the biggest value for its business model.”

Those businesses aren’t the only ones viewed as non-essential to Broadcom’s CEO. Since its purchase of VMware, Broadcom has killed more than 56 VMware products and platforms, including customer favorites such as VMware vSphere+, VMware Aria Suite, and VMware NSX. It also quietly buried others, included VMware’s popular Free ESXi hypervisor, a decision which came to light thanks to a knowledge base article that revealed the product’s termination.

Legacy of layoffs

Given Broadcom’s treatments of VMware assets since the acquisition, one industry watcher said any potential future deal to sell Carbon Black will likely not fetch the same value as the one previously arranged with KKR, which has a sizable portfolio of tech investments.

“A security company is still driven by engineering talent,” noted John Bambenek, president at Bambenek Consulting, a cybersecurity consulting firm. “After several rounds of layoffs, it should be clear to any buyer that they’ve cut the muscle of the company instead of merely fat. There is nothing wrong with Broadcom wanting to focus on its core competencies, but it has taken an asset and has driven it into the ground … and potential buyers have noticed.”