The deal between Microsoft (NASDAQ:MSFT) and Activision (NASDAQ:ATVI) has been one of the most watched in the video game stock field for some time now. And now, with word that the UK has stepped in to block the deal, there’s a surprising victim in all this: VMware (NYSE:VMW). VMware lost slightly in Wednesday’s trading, thanks mainly to an unexpected connection.
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So why did VMware lose ground? Some are drawing connections between VMware’s recent deal with Broadcom (NASDAQ:AVGO), which is also under review by UK antitrust authorities. If they didn’t let a deal go through between video game companies, it’s not exactly a great picture for VMware. Already, VMware has been pushed into a Phase 2 investigation, which is basically insider-speak for “a really in-depth investigation.”
It doesn’t look good for VMware already; so far, the UK Competition and Markets Authority (CMA) has detailed several objections, along with a roadmap that leaves only two months slack to handle any regulatory issues to meet a deadline of October 2023. So far, three “theories of harm” have emerged, including hurting hardware makers via virtualization software, issues of information sharing, and harm to other server virtualization companies thanks to Broadcom’s connections in the field. VMware, for its part, recently offered up patches to address potential security vulnerabilities. That doesn’t seem to have done it many favors with regulators, though.
Overall, analyst consensus calls VMware stock a Hold, with five Hold ratings and just one Buy rating. Further, with an average price target of $139.80, VMW offers 13.31% upside potential.
