Broadcom has claimed that AT&T plans to stop using VMware software, but has been tardy about making the move.
The allegation appears in a court filing related to the dispute initiated by AT&T over an extension of support services that we reported on September 5. In its complaint, AT&T stated it holds perpetual licenses for VMware products and alleged it had a contract with pre-acquisition VMware that would allow it to extend support services covering those products for two years beyond September 8 – but that Broadcom had chosen not to honor that deal.
AT&T claimed that Broadcom instead offered it subscriptions to VMware's new bundles of products and services – which constituted an "attempt to bully AT&T into paying a king's ransom for subscriptions AT&T does not want or need." The telco giant has sought an injunction to have Broadcom provide the support to which it believes its contract entitles it.
Broadcom last Friday fired back by filing a Memorandum [PDF] in which it claims AT&T's filing represents an attack "intended to generate press and distract the Court from a much simpler story. For years, AT&T enjoyed heavily discounted pricing from VMware and derived enormous value from the parties' agreement." That agreement, Broadcom argues, "contains an unambiguous 'End of Availability' provision, which gives VMware the right to retire products and services at any time upon notice."
The Memorandum also alleges "a year ago, AT&T opted not to purchase the very Support Services it now asks the Court to force VMware to provide. AT&T did so despite knowing Defendants were implementing a long-planned and well-known business model transition and would soon no longer be selling the Support Services in question."
The Broadcom filing claims the chips-and-code conglomerate "nonetheless negotiated in good faith with AT&T for months to enter into a new agreement that will fully address AT&T's needs. AT&T has rejected every proposal despite favorable pricing it has been offered and the situation it has created (and which it can still avoid)."
Then comes the kicker:
Elsewhere in the filing, Broadcom claims "AT&T has admitted in writing to VMware that it can 'migrate away' from VMware software and doing so will have 'a very quick payback and strong IRR [internal rate of return]'."
The migration allegation also appears in an Affidavit [PDF] filed by Broadcom that mentions an email from Susan Johnson, AT&T's executive vice president and general manager, to Broadcom CEO Hock Tan in which the AT&T exec allegedly wrote that a plan to "migrate away from VMware (projected at $40–$50M) has a very quick payback."
The affidavit claims that Broadcom offered AT&T a five-year subscription "at a price that is well below market, and that is as favorable if not even more favorable than offers made to similarly situated customers." AT&T, the document alleges, indicated 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."
The affidavit therefore alleges that AT&T only wants continued support from Broadcom to give it enough time to perform its migration – meaning Broadcom would be harmed by having to keep supporting products from which it's moved on, rather than being able to work on its own business plan.
No wonder Broadcom is defending itself fiercely: it's being asked to provide services to a customer that has already decided to dump it, and wants to hurt it on the way out.
Broadcom also argues that AT&T's intention to quit VMware means the telco giant's argument – that it would suffer harm from not being able to acquire support services – is weak.
- Broadcom CEO predicts hyperscalers poised to build million-accelerator clusters
- Research suggests more than half of VMware customers are looking to move
- Veeam debuts its Proxmox backup tool – and reveals outfit using it to quit VMware
- Public clouds are 'dirty' about VMware's on-prem push, says Broadcom CEO Hock Tan
Another argument alleges that AT&T's claim that VMware is a mission-critical tool is hard to support, as "it is running very old software versions, some of which was already running unsupported due to AT&T's failure to upgrade. VMware has tried to encourage AT&T to upgrade, to no avail."
Broadcom also alleges that AT&T has misinterpreted the contract the comms giant feels gives it the right to acquire extended services.
Another of Broadcom's arguments appears to all but accuse AT&T of breaching licenses. In a section of the memorandum Broadcom notes AT&T's claim that it would suffer harms from being denied support, but argues AT&T can't say which of the carrier's many VMware licenses would cause those harms.
"When pressed for details, AT&T has been unable to articulate where or how VMware's software was being used and its core counts were always uncertain or dubious."
Subscription move winning few fans
Another argument used across the Memorandum and Affidavit points out that AT&T could scarcely not have known that VMware was moving to subscriptions, both before and after its acquisition by Broadcom. That shift, Broadcom argues, should have seen AT&T plan accordingly.
VMware was indeed increasingly offering subscriptions – but Broadcom accelerated the move massively.
Indeed, after acquiring VMware Broadcom decided not to provide support services for holders of perpetual licenses once existing contracts expire.
That decision means Broadcom-provided support is only available for those who move to Broadcom's subscription bundles of product and services.
While the software components of those bundles cost less than would have been the case if acquired individually from the old VMware's price lists, analysts assert that Broadcom's bundled software and support pricing means VMware customers pay more and often end up with software they don't want or need.
Broadcom argues that the combined power of the products and services in its bundles will swiftly pay for themselves, and that future product improvements will mean even better ROI.
AT&T is one of several high-profile customers that apparently disagrees. We've seen insurance giant Geico, fintech Computershare, Boyd Maming, and John Deere go public with plans to adopt other platforms. The Register is aware of others – some of them the kind of giant business Broadcom choses to work with directly – testing or contemplating VMware rivals. Informal research suggests tens of thousands more orgs could make a move away from VMware.
Those would-be migraters now have an example of how Broadcom might handle their negotiations: steep discounts for long-term commitments, hardball legal filings if things get heated. ®