Broadcom loose top software exec in the middle of VMware deal to head combined Citrix-Tibco company

Broadcom Inc.’s head of software Tom Krause is leaving the company in the middle of a $61 billion software acquisition he helped bring about, which analysts called “a surprise” and “not the greatest of news” Monday morning, to head a combined Citrix-Tibco company.

In a Securities and Exchange Commission filing Monday, Broadcom AVGO,
-3.17%
said that Krause — who served as Broadcom’s chief financial officer from October 2016 to December 2020, after joining the company in 2012 as vice president of corporate development — will leave the company effective Friday to “accept another role at a privately held enterprise software company. ”

Late Monday, digital workspace company Citrix Systems Inc. CTXS,
+1.54%
cleared up where Krause was heading. Citrix, which is being acquired by affiliates of Vista Equity Partners and Evergreen Coast Capital Corp. for $16.5 billion, plans to combine with Vista’s Tibco Software, and Krause will be CEO of the private software company.

Broadcom said that Krause was not leaving because of any disagreements with the company. Chief Executive Hock Tan immediately assumes Krause’s responsibilities, but Krause’s position, “president of Broadcom Software Group,” would be eliminated. Broadcom also named Chief Operating Officer Charlie Kawwas as president of the company’s new “Semiconductor Solutions Group,” effective immediately.

Software has been a huge growth effort at Broadcom in recent years with the acquisition of Symantec’s enterprise security business in 2019, and CA Inc. in 2018.

Broadcom announced its intention to acquire VMware Inc. VMW,
-1.14%
in late May for $61 billion in cash and stock in a big addition to its software holdings. Krause is largely credited with helping engineer the deal, which will bring all of Broadcom’s software business under the VMware brand. As recently as three weeks ago, Krause outlined in a blog entry how Broadcom was reaching out to VMware customers and making “post-closing” plans.

Bernstein analyst Stacy Rasgon, who has an outperform rating and a $675 price target on Broadcom, said that he was meeting with Hock Tan on Monday by sheer coincidence, and that he’d ask about Krause’s departure directly.

“The move admittedly comes as a surprise especially given the recent VMware deal announcement, and especially as Tom Krause has supposedly been the architect of Broadcom’s broader software strategy,” Rasgon said. “However, given how early we are in the VMW timeline we would be somewhat skeptical to ascribe the departure to any issues with the deal itself at this point.”

Rasgon also noted that appointing Kawwas as head of the semis group suggested that Hock Tan was “freeing up his time to focus more on the software segment that he will now apparently be overseeing directly, and given VMware deal execution will now (presumably) be directly under Hock we believe execution risks with the deal should be kept to a minimum.”

Mizuho analyst Jordan Klein expressed disappointment about Krause’s departure.

“Not the greatest of news in my view given Tom is well respected and liked across investor base and commands a strong track record with CEO Hock Tan of consistent free cash flow growth and margin expansion coupled with strong shareholder return and value creation,” Klein said . “As a team, Hock and Tom are about as good as it gets not only in Semis, but actually all of Tech, in terms of longer term execution, communication and shareholder return generation.”

Broadcom shares were slightly underperforming the PHLX Semiconductor Index SOX,
-2.46%
during a broad market selloff Monday. Broadcom shares fell 3.2% on Monday, while the SOX index was down 2.5%.

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