Broadcom: AT&T is trying to 'rewind the clock' on VMware

Broadcom is refuting AT&T's claims that it has engaged in bullying tactics and price gouging by failing to honor terms of a VMware contract negotiated before it acquired the technology provider.

Instead, Broadcom states that after months of good faith negotiations, AT&T is attempting to "rewind the clock" to access VMware products through a licensing model that has been discontinued.

Broadcom's remarks come from a memorandum filed Sept. 20 with the Supreme Court of the State of New York in response to AT&T's Aug. 29 injunctive relief. In that relief, AT&T claimed an agreement for services ending Sept. 8, negotiated before Broadcom acquired VMware, included a two-year extension for support services that isn't being honored. In its place, Broadcom offered a subscription service to continue support, according to AT&T, which it described as a breach of contract.

But in its memorandum, Broadcom stated, "the agreement contains an unambiguous 'End of Availability' provision, which gives VMware the right to retire products and services at any time upon notice."

It asserted that it provided notice and negotiated in good faith leading up to the end-of-service date, but that "AT&T has rejected every proposal despite favorable pricing it has been offered and the situation it has created," according to the memorandum. Broadcom added that it agreed after AT&T's initial filing to continue providing support until Oct. 21, which it described as another example of exercising in "good faith."

Broadcom acquired VMware in 2023 for $61 billion and has ushered in significant changes, most acutely in how VMware products and services are packaged and sold. In January, Broadcom ended perpetual licenses that allowed customers to select from 168 offerings; now, it offers two primary subscriptions of software bundles -- VMware Cloud Foundation or VMware vSphere Foundation.

"Broadcom is simplifying its route to market," said Paul Nashawaty, an analyst at the Futurum Group. Customers will have to decide if the changes work for them, but Broadcom is unlikely to budge from what it sees as a streamlined, stable go-to-market strategy, even if it means losing customers like AT&T, he said.

This shift in licensing model has caused customers to deal with potential cost increases and, in some cases, to re-evaluate their relationship with VMware altogether.

"VMware customers must be able to determine the criticality of VMware for themselves," said Naveen Chhabra, an analyst at Forrester Research. "The most common thread that I see from clients is: 'How can we optimize our VMware spending, as migrating out of it overnight is impractical.'"

VMware customers are angry at the forced bundling, which eventually leads to limited choice.

Broadcom's filing provides background on how it transitioned from a perpetual to subscription licensing model, but it spends less time addressing its decision to bundle VMware software, a sticking point for some customers.

"VMware customers are angry at the forced bundling, which eventually leads to limited choice," Chhabra said. "Perpetual or subscription does not have any bearing on bundling. It is rather the subscription and the packaging that collectively leads to sticker shock for clients."

AT&T provided no additional comment for this story and reverted to its original statement: "We have filed this complaint to preserve continuity in the services we provide and protect the interests of our customers."

The two companies are scheduled to deliver opening remarks Oct. 15.

Nicole Laskowski is a senior news director for TechTarget Editorial. She drives coverage for news and trends around enterprise applications, application development and storage.