Full narration of the briefing. Click a section heading to jump the player to that moment.
If you are renewing anything with Broadcom in the next eighteen months, whether that is VMware or the CA mainframe stack, the single most useful thing you can do is stop treating the price increase as a surprise. It is not improvisation, and it is not a rogue account team. It is a published strategy, executed the same way three times, and almost all of it is written down in filings you can read for yourself. I am Tom, Claire is with me, and this is Negotiating Broadcom from Redress Compliance.
Ten short briefings for people who hold these contracts and want to walk into the renewal knowing exactly what they are dealing with.
Start with what Broadcom actually bought, because the arithmetic explains everything that followed. CA Technologies filed its final annual report two months before the deal. Its Mainframe Solutions segment did two thousand one hundred and seventy six million dollars of revenue, at a sixty four percent operating margin. That was more than half the company, and it was the most profitable thing CA owned.
In the same filing, in its own risk factors, CA described that same segment as subject to an industry wide decline due to new technologies. Broadcom paid eighteen point nine billion dollars for it. When you pay that much for a slowly shrinking annuity, volume growth is not the plan. Price is the plan.
And the plan is not a secret either. At Broadcom's own software investor day the whole model was put on a slide. Six hundred strategic accounts to focus on. Six thousand more to sustain.
One hundred thousand allowed to trail away. Research and development cut from about seventeen percent of revenue down to fourteen. Sales and marketing cut from twenty nine percent to seven. Segment operating margins taken from roughly thirty nine percent to roughly seventy.
Every renewal conversation you have ever had with this vendor is an output of that slide. So if your account feels under supported, that is not neglect and it is not bad luck. That is the design working as intended.
It works. In its 2025 financial year Broadcom's infrastructure software segment produced twenty seven billion dollars of revenue, up twenty six percent, at a seventy six point eight percent operating margin. Gross margin on that software is ninety three percent. But the number that tells you most about your next three renewals is the backlog.
Contracted software revenue not yet recognised went from forty nine billion dollars to seventy three billion in a single year. That is not a forecast, and it is not a pipeline. Those are signatures already collected, on multi year terms, from customers who in many cases did not want to sign them. The renewal cycle is the machine.
VMware is where you can watch the method run at speed, because it happened in public and it happened recently. Perpetual licences stopped being sold in December 2023. The portfolio collapsed into two subscription bundles. Licensing moved to per core, with a sixteen core minimum on every processor.
One year renewals disappeared from the core products, leaving three year terms paid annually up front. The reseller channel was cut down, then cut again, then closed to almost everyone. Gartner has said it has seen client costs as much as triple. None of that was hidden.
All of it was announced, or relayed through distribution, inside about two years.
Now the part that matters if your exposure is on the mainframe. Broadcom reports two segments, semiconductors and infrastructure software, and nothing below that. In its most recent quarterly filing the word VMware appears twenty three times. The word mainframe appears once.
CA Technologies does not appear at all. There is no published mainframe revenue, no growth rate, no renewal rate, no customer count. That cuts both ways, and you should hold both halves of it. No analyst is pressuring that business to grow.
And equally, every claim either side makes about investment in the platform is unfalsifiable from public filings. So negotiate the contract in front of you, not the narrative around it.
So here is the frame for the nine briefings after this one. You are not dealing with a vendor that has lost its way, and appeals to fairness will not land, because nothing here is accidental. You are dealing with a disciplined margin programme running against an installed base it believes cannot leave quickly. That is a negotiation you can prepare for, and it rewards preparation more than almost any other vendor relationship you hold.
Next time, Daniel takes us through the VMware estate as it actually stands after the repackaging, including the deadline that matters considerably more than your renewal date does. That deadline is October 2027, and most people have not priced it.
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Talk to a Broadcom negotiator