According to Network World, European cloud watchdog ECCO has declared Broadcom’s status as “Red – Critical” following the company’s refusal to backtrack on massive VMware price increases. The organization warned that Broadcom’s licensing changes could prove “lengthy, expensive and potentially ruinous” for European cloud providers, citing additional concerns about alleged legal intimidation and cease-and-desist letters sent to customers with perpetual licenses. ECCO has escalated its campaign by filing an action with the General Court of the European Union challenging the European Commission’s approval of the VMware acquisition, arguing the conditions made no reference to complaints about Broadcom’s behavior. The watchdog also noted that Microsoft has achieved “green” status after policy changes, but warned that Broadcom’s tactics are now being copied by other vendors imposing less favorable licensing terms. This escalating conflict represents a critical test for cloud market regulation in Europe.
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The Broadcom Playbook Unpacked
What we’re witnessing with VMware under Broadcom’s ownership follows a familiar pattern from the semiconductor giant’s playbook. Broadcom has historically pursued aggressive consolidation strategies after major acquisitions, rapidly eliminating product lines, raising prices, and forcing customers toward more profitable subscription models. The current situation with VMware represents this approach applied to enterprise software at unprecedented scale. When Broadcom acquired CA Technologies in 2018 and Symantec’s enterprise security business in 2019, similar patterns emerged – though the VMware situation is particularly consequential given VMware’s central role in enterprise virtualization and cloud infrastructure. The fundamental business logic appears to be sacrificing market breadth for margin depth, betting that the remaining enterprise customers will pay significantly more for what they consider essential infrastructure.
European Cloud Ecosystem Under Siege
The specific threat to European cloud providers cannot be overstated. Many smaller European cloud computing companies built their businesses on VMware’s virtualization technology, which allowed them to compete against hyperscalers like AWS, Azure, and Google Cloud. The dramatic price increases and forced subscription model changes effectively pull the economic rug out from under these providers. What makes this particularly damaging is the timing – European cloud providers are already struggling with energy costs, regulatory complexity, and competition from well-funded American and Chinese giants. The CISPE members facing these changes represent a vital component of Europe’s digital sovereignty strategy, making this both an economic and strategic concern for EU policymakers.
Legal Battlefronts Multiply
The legal dimensions of this conflict are expanding rapidly on multiple fronts. ECCO’s decision to challenge the European Commission’s approval of the acquisition represents a sophisticated legal strategy that goes beyond complaining about pricing. By targeting the regulatory approval itself, they’re essentially arguing that the Commission failed to adequately consider how Broadcom‘s business model would impact cloud competition. The alleged cease and desist letters sent to perpetual license customers add another layer of legal complexity, potentially raising questions about contractual rights and good faith dealing. This multi-front legal war suggests that European cloud providers have decided that negotiation alone won’t resolve their concerns, and they’re prepared for a prolonged conflict that could shape cloud licensing practices for years to come.
The Microsoft Contrast and Contagion Risk
The stark contrast between Microsoft’s “green” status and Broadcom’s “red-critical” designation in ECCO’s first report reveals much about corporate strategies in regulated markets. Microsoft has learned through decades of antitrust battles that cooperation with regulators often yields better long-term outcomes than confrontation. Their willingness to adjust pay-as-you-go pricing and sovereign cloud deployment policies demonstrates a pragmatic approach to European regulatory concerns. The more alarming development is ECCO’s warning about “contagion” – other vendors observing Broadcom’s tactics and implementing similar aggressive licensing changes. If this behavior spreads, we could see a fundamental restructuring of enterprise software economics that disadvantages smaller players and reduces competition across multiple technology sectors.
Broader Implications for Tech Consolidation
This conflict represents a critical test case for how regulators will handle future technology mega-acquisitions. The European Commission’s conditional approval of the Broadcom-VMware deal assumed that behavioral remedies would address competition concerns, but ECCO’s actions suggest these measures may be insufficient. The outcome will influence how regulators approach similar situations involving essential infrastructure technologies. If Broadcom succeeds in maintaining its pricing strategy despite organized opposition, it could embolden other acquiring companies to pursue similarly aggressive post-acquisition strategies. Conversely, if ECCO and CISPE succeed in forcing changes, it would demonstrate the growing power of industry collectives to shape market outcomes in Europe’s regulated digital economy.
What Comes Next in the Standoff
The most likely near-term outcome involves prolonged legal maneuvering rather than quick resolution. Broadcom has shown little inclination to backtrack on major strategic decisions, while European cloud providers appear equally determined to resist what they view as existential threats. The General Court case challenging the acquisition approval could take years to resolve, during which time the economic damage to smaller cloud providers may become irreversible. Meanwhile, the “red-critical” designation serves as both a warning to customers and a rallying cry for broader industry action. The real question is whether other regions will follow Europe’s lead in confronting these licensing changes, or if Broadcom will succeed in segmenting its approach by geography – a strategy that could ultimately undermine global cloud competition.
