Broadcom has fired back in the ongoing legal dispute with AT&T over VMware software support services, claiming that AT&T is resorting to “sensationalism” and had long intended to stop using VMware software but delayed the move.
This revelation comes as part of Broadcom’s recent court filing, countering AT&T’s allegations that Broadcom refused to honor a contract allowing for extended support services.
“AT&T resorts to sensationalism by accusing Broadcom of using ‘bullying tactics’ and ’price gouging,’” Broadcom said in a September 20 court filing. “Such attacks are intended to generate press and distract the Court from a much simpler story.”
The dispute, which began with AT&T’s lawsuit accusing Broadcom of withholding support to push new subscription-based services, has escalated with Broadcom’s latest filing. The filing contends that AT&T had admitted internally that it was planning to migrate away from VMware software, with the telecom giant stating in emails that the transition would result in “a very quick payback and strong internal rate of return (IRR).”
In response to the lawsuit filed by AT&T, the chipmaker has alleged that “AT&T indicated, however, that it would rather file a lawsuit and ‘migrate away’ from VMware’s software if Broadcom does not allow it to renew the discontinued Support Services.”
According to Broadcom, AT&T had known for years about VMware’s shift towards subscription-based offerings and could have prepared for the move.
“For years, AT&T enjoyed heavily discounted pricing from VMware and derived enormous value from the parties’ agreement. But the agreement contains an unambiguous ‘End of Availability’ provision, which gives VMware the right to retire products and services at any time upon notice,” the chipmaker’s lawyers wrote in the response.
“What’s more, a year ago, AT&T opted not to purchase the very Support Services it now asks the Court to force VMware to provide.”
The filing alleged that AT&T’s lawsuit is an attempt to secure more time to transition to other software while still receiving discounted support services, which Broadcom has already phased out for perpetual license holders. (Read more in our timeline of the Broadcom-VMware deal)
A breakdown of the allegations
Broadcom’s filing claimed that AT&T’s complaint, filed earlier this year, is a distraction from the real issue: AT&T has been reluctant to make the necessary software upgrades and chose not to purchase support services when it had the opportunity.
In its filing, Broadcom pointed out that AT&T had benefited from heavily discounted pricing for VMware products for years but was now unwilling to transition to Broadcom’s new subscription-based offerings.
“AT&T has rejected every proposal, despite favorable pricing, and would rather file a lawsuit and migrate away from VMware if Broadcom does not allow it to renew the discontinued support services,” Broadcom stated in its memorandum. “But AT&T chooses instead to wait until a week before its Support Services were set to expire to file its Motion.”
The company further argued that AT&T’s claim of potential harm from losing support is weak, considering the telecom giant’s internal admission that it had been using outdated software versions and had already delayed upgrades.
Broadcom’s defense: migration allegations and contractual rights
A key element of Broadcom’s defense centers on an email from Susan Johnson, AT&T’s executive vice president to Broadcom CEO Hock Tan. In the email, Johnson outlined a plan to migrate away from VMware, estimating the project’s cost at $40 million to $50 million with a quick payback.
Broadcom argued that this proves AT&T’s true intention behind the lawsuit — to secure temporary support while preparing to leave VMware entirely.
Broadcom also addressed the terms of its agreement with AT&T, arguing that VMware’s “End of Availability” provision allowed it to retire products and services after giving notice. The company stated it had negotiated in good faith with AT&T for months, offering a five-year subscription at favorable terms, which AT&T declined.
The filing further alleged that AT&T’s reluctance to upgrade its VMware software led mission-critical systems to run unsupported versions, weakening its argument that losing support would cause significant harm.
The legal battle stems from AT&T’s earlier claim that Broadcom, following its $61 billion acquisition of VMware, failed to honor a pre-acquisition contract with VMware that allowed AT&T to extend support services for two years beyond September 2023. AT&T accused Broadcom of attempting to push expensive subscriptions for products it didn’t need, calling it an “attempt to bully AT&T into paying a king’s ransom.”
AT&T sought an injunction to force Broadcom to continue offering support for VMware’s products under the terms of its perpetual license, which AT&T claimed was part of the original agreement with VMware.
AT&T and Broadcom did not immediately respond to a request for comment.
Broadcom’s end to perpetual VMware licenses
Broadcom’s push to transition VMware customers to subscription models has raised concerns across the industry. Many VMware clients, who held perpetual licenses, have resisted the shift, arguing that Broadcom’s new bundles often include software and services they don’t need.
Analysts have noted that, while Broadcom claims the bundles offer long-term value, the shift to subscriptions generally leads to higher costs for customers in the short term.
“A subscription model is not necessarily all bad,” said Mukesh Ranjan, VP at Everest Group. “Many mature enterprises are not interested in changing too much of their estate and a subscription model makes it easier for them in terms of contracting, relationships with software vendors, access to the right talent, and often better pricing than a licensing structure.”
“However,” Ranjan pointed out, “in the case of Broadcom, the subscription bundling without allowing a licensing option, showcases an intent to generate higher revenue for itself rather than improve customer relationships or other technical improvements.”
The broader industry is watching this case closely, as it could set a precedent for how large tech companies handle long-term support for perpetual software licenses amid business model transitions. Broadcom has already accelerated VMware’s shift toward subscriptions post-acquisition, making support services available only to customers who move to these new offerings.
“Migration away from VMware will not be easy and will pose multiple challenges including transition and transformation costs, performance issues, data protection complexities, integration challenges with remaining infrastructure, security and compliance challenges, skill gaps, and resistance to change from employees,” Ranjan added.
As the court proceedings continue, the stakes remain high for both companies. AT&T’s lawsuit hinges on its ability to prove that its pre-acquisition contract with VMware entitles it to extended support, while Broadcom’s defense rests on its argument that AT&T is merely seeking additional time to complete its planned migration from VMware.
The outcome of this case could not only affect the future of AT&T’s infrastructure but also serve as a significant test for Broadcom’s approach to managing its acquired VMware assets.
Source:: Network World