Dive Brief:
- AT&T and Broadcom are moving toward a settlement over a legal dispute involving VMware support services, lawyers for the two companies said in a letter to the New York State Supreme Court filed Friday.
- The two parties have made enough progress in their discussions to warrant postponement of oral arguments on AT&T's motion for injunctive relief, which was scheduled to begin Tuesday. “The parties respectfully request that the October 15 oral argument be adjourned to October 22, 2024, or to the earliest date thereafter that is convenient for the court,” the letter said.
- AT&T asked the court to prevent Broadcom from ending support services for the telecommunications company’s VMware deployments in a case filed in August. The suit claimed Broadcom was in breach of existing contracts and trying to bully AT&T into paying hundreds of millions of dollars for subscription-based software bundles.
Dive Insight:
After a month of back-and-forth accusations between the two companies, Broadcom agreed Friday to extend AT&T’s VMware support services for up to 30 days while settlement discussions progress.
Broadcom notified AT&T that support for its roughly 75,000 virtual machines running across 8,600 servers would end on Sept. 8, according to court documents. Broadcom moved the termination date to Oct. 21 shortly after the suit was filed.
The dispute hinges on major changes in the VMware portfolio announced in December, less than a month after Broadcom completed its $61 billion purchase of the virtualization software company. The plan ended perpetual licenses in favor of a pay-as-you-go subscription model that bundled thousands of VMware products into four core offerings.
Customers reported bills spiking by as much as 500%, according to Forrester’s 2025 budget planning guide for technology executives. AT&T told the court it would be forced to pay a tenfold increase in annual VMware costs for unwanted features or risk widespread network outages impacting millions worldwide if support lapsed.
VMware underpins FirstNet, a federal wireless first-responder communications network the U.S. Department of Commerce awarded to AT&T in 2017, Scott Agnew, the company’s president responsible for public sector mobility service operations, said in an affidavit made public Friday.
AT&T is seven years into a 25-year contract to maintain FirstNet. An end to VMware support would disrupt operations and put the network in jeopardy, Agnew stated.
“Like any other software, the software used by AT&T to operate AT&T’s first responders network requires regular maintenance, updates and fixes that only [Broadcom] can provide,” he said in the affidavit.
Broadcom fired back in court filings last month, claiming AT&T had ample time to prepare for the business model transition and had communicated to Broadcom its intention to switch providers.
AT&T EVP and GM Susan Johnson signaled the company’s plans in an August email to Broadcom President and CEO Hock Tan filed as evidence in the case. “We are planning to prioritize investment to migrate off of VMware,” Johnson said in the email.
While Broadcom did not rebut allegations of the tenfold cost increase, it said AT&T failed to exercise renewal terms on existing perpetual licenses prior to Sept. 9, 2023, per an agreement between the two companies, Broadcom VP of VMware Americas Strategic Sales Randall Gressett said, in an unredacted affidavit made public Friday.
“If AT&T truly felt the support services were essential to avoid irreparable harm to its customers, it would have exercised and purchased the ‘three-year-renewal’ option … or at least elected to renew for more than one year,” Gressett said.
