Dive Brief:
- AT&T accused Broadcom of breach of contract and sought injunctive relief in a filing with the New York State Supreme Court last week.
- The telecommunications giant claims Broadcom, which purchased VMware for $61 billion in November, is threatening to withhold support for previously purchased software under existing perpetual license unless AT&T pays hundreds of millions of dollars for bundled subscriptions. Current VMware support for AT&T is set to expire next week, according to the court document.
- “Broadcom’s attempt to bully AT&T into paying a king’s ransom for subscriptions AT&T does not want or need, or risk widespread network outages that could cripple the operations of millions of AT&T customers worldwide, is precluded by the express terms of the parties’ written agreement,” AT&T said in the filing.
Dive Insight:
The Broadcom acquisition triggered sweeping changes to VMware’s product portfolio, trimming thousands of a la carte solutions down to four core subscription offerings.
AT&T filed the complaint to “preserve continuity in the services we provide and protect the interests of our customers,” a spokesperson for the company said in an email Thursday.
Broadcom said it strongly disagrees with the allegations and believes it will prevail in court, a spokesperson told CIO Dive via email. VMware has been moving toward a subscription model for several years, dating back to before the acquisition, and subscription billing models are standard practice in the software industry, the spokesperson said.
While Broadcom touted the cost savings potential of the bundled VMware Cloud Foundation and vSphere full-stack virtualization platforms, customers have seen their bills spike by as much as 500%, according to Forrester.
“Customers are reporting that the prices are now anywhere between four to seven times higher,” Forrester Principal Analyst Naveen Chhabra told CIO Dive.
AT&T is not disputing prospective changes to the VMware business model. It has instead launched a legal challenge to Broadcom’s attempt to retroactively negate existing agreements.
Specifically, the complaint references an August 2022 amendment that gave AT&T the option of extending VMware support services through 2026, per the terms of an enterprise license agreement that dates back to 2007.
“Although AT&T has already advised Broadcom that it is exercising its option to renew support services for at least another year, Broadcom is refusing to honor AT&T’s renewal,” according to the document. “Broadcom states it will only continue to provide support services if AT&T agrees to purchase scores of subscription services and software.”
Like many large enterprises, AT&T has extensive VMware deployments embedded in critical IT systems. The company said it’s currently running at least 75,000 virtual machines across approximately 8,600 servers.
“The applications running on these virtual machines touch innumerable aspects of AT&T’s services to its customers,” AT&T said. “Without the support services, it is not a question of if but when the software will crash due to a software error, security issue or lack of upgrades and maintenance.”
