Broadcom is countering AT&T’s accusations of bullying and price gouging, asserting that it has not honored a VMware contract negotiated prior to its acquisition of the technology provider.
According to Broadcom, AT&T is trying to “rewind the clock” after months of constructive negotiations, seeking to access VMware products through an outdated licensing model. Broadcom’s statements were made in a memorandum submitted to the Supreme Court of New York on September 20, addressing AT&T’s request for injunctive relief, which was filed on August 29. In that request, AT&T claimed that an agreement for services that ended on September 8 included a two-year extension for support services, which Broadcom has not honored. Instead, Broadcom offered a subscription model for continued support, which AT&T characterizes as a breach of contract.
In its memorandum, Broadcom argued that the contract explicitly includes an “End of Availability” clause that grants VMware the right to discontinue products and services at any time with prior notice. Broadcom contended that it had provided notice and entered into good faith negotiations prior to the end-of-service date, but that “AT&T has rejected every proposal despite favorable pricing options it was offered, creating the current situation.” The company noted that it agreed to continue support until October 21 following AT&T’s initial filing, which it described as an example of its commitment to good faith.
Broadcom completed its acquisition of VMware in 2023 for $61 billion, leading to significant changes in the way VMware’s products and services are packaged and sold. In January, Broadcom eliminated perpetual licenses that allowed customers access to multiple offerings and shifted to two primary subscription bundles: VMware Cloud Foundation or VMware vSphere Foundation.
“Broadcom is simplifying its route to market,” stated Paul Nashawaty, an analyst at The Futurum Group. He emphasized that while customers will need to evaluate whether these changes suit their needs, Broadcom is likely to maintain its streamlined go-to-market strategy, even at the risk of losing clients like AT&T.
The transition to a subscription licensing model has raised concerns among customers about potential cost increases and prompted some to reassess their relationships with VMware entirely. “VMware customers must determine how critical VMware is for their operations,” said Naveen Chhabra, an analyst at Forrester Research. “Many clients express concerns about optimizing their VMware spending since an immediate migration away from it is not practical.”
The forced bundling of VMware offerings has elicited frustration among customers, leading to limited choices. “VMware customers are upset about the bundling, which ultimately restricts their options,” noted Chhabra. He added, “The distinction between perpetual and subscription models doesn’t affect bundling; rather, it’s the combination of subscription and packaging that causes sticker shock for clients.”
AT&T did not provide any further comments on this matter and reiterated its original statement: “We have filed this complaint to preserve continuity in the services we provide and to protect our customers’ interests.” The two companies are set to deliver opening remarks on October 15.
Nicole Laskowski, a senior news director for TechTarget Editorial, oversees coverage of news and trends related to enterprise applications, application development, and storage.