Broadcom accuses AT&T of attempting to “turn back the clock and force Broadcom to sell” “support services for perpetual software licenses … that VMware has discontinued from its product line and which AT&T has no contractual right to purchase.” The statement comes in legal documents Broadcom filed in response to AT&T's lawsuit against Broadcom over the company's refusal to renew support for its perpetual VMware licenses. [PDF].
On August 29, AT&T filed a lawsuit [PDF] against Broadcom, alleging that Broadcom breached a contract by refusing to provide a one-year extension of support for perpetually licensed VMware software. Broadcom famously ended perpetual VMware license sales shortly after the acquisition closed in favor of a subscription model with roughly two bundles of products instead of many SKUs.
AT&T claims that the VMware contract (which was drawn up before its acquisition of Broadcom closed in November) includes three one-year extensions of perpetual license support, and it is currently trying to implement the second. AT&T says it uses VMware products to run 75,000 virtual machines (VMs) on about 8,600 servers. The VMs are intended to support customer service operations and operational management efficiency, AT&T says. AT&T is asking the New York State Supreme Court to stop Broadcom from terminating VMware support services for AT&T and “further relief” if it deems it appropriate.
On September 20, Broadcom filed a motion to dismiss AT&T's motion. The defense includes its previously held position that VMware moved to a subscription model before Broadcom acquired it. The transition from perpetual licensing to subscriptions was years in the making and thus something AT&T should have prepared for, Broadcom argues. Broadcom alleges that AT&T has admitted that it plans to migrate away from VMware software and that AT&T could have spent “the last few months or even years” doing so.
The document argues that “AT&T is engaging in sensationalism by accusing Broadcom of 'bullying' and 'price-gouging.' Such attacks are designed to attract press attention and distract the court from a much simpler story.”
Broadcom claims the story is simple:
…the agreement contains an unambiguous “End of Availability” provision, which gives VMware the right to discontinue products and services at any time upon notice. Moreover, AT&T opted a year ago not to purchase the very Support Services that it is now asking the court to compel VMware to provide. AT&T did so despite knowing that the defendants were implementing a long-planned and well-known business model transition and would soon cease selling the Support Services in question.
Broadcom says it has been negotiating a new contract with AT&T for “months,” but the plaintiff “has rejected every proposal, despite favorable prices.”
Broadcom also argues in its filing that AT&T sought an injunction. It argues that New York only grants injunctions in “rare circumstances,” which would not apply here.
AT&T has options, Broadcom says
AT&T's lawsuit alleges that the loss of VMware support will cause extreme harm to itself and beyond. The lawsuit alleges that 22,000 of AT&T's VMware VMs are used to support “services to millions of police officers, firefighters, paramedics, emergency responders and incident response team members across the country… for use in connection with matters of public safety and/or national security.” It also alleges that communications for the Office of the President are at risk without continued support from VMware.
However, Broadcom claims that AT&T has other choices:
AT&T has other options, and therefore the most it can get is damages. The fact that AT&T was given more than eight months’ notice and failed to take steps to prevent the alleged harm (e.g., subscribe to the new offerings or switch to another solution) in the meantime is telling and precludes any finding of irreparable harm. Even if AT&T believes it deserves a better price, it could have avoided the alleged irreparable harm by entering into a subscription agreement and filing a lawsuit for damages instead of an injunction.
AT&T previously declined to answer questions from Ars Technica about its backup plans for supporting such key customers should AT&T lose support for VMware.
Broadcom has rubbed some customers the wrong way
Broadcom closed its acquisition of VMware in November and quickly implemented dramatic changes. In addition to Broadcom's reputation for turning around businesses after the purchase, moves such as ending perpetual licensing, acquiring VMware's largest customers outright instead of using channel partners, and increasing costs by bundling products and imposing higher CPU core requirements have caused customers and partners to reconsider working with the company. Migrating from VMware can be extremely challenging and expensive due to its deep integration into some IT environments, but many are exploring the migration and some expect Broadcom to face years of resistance.
As Steve McDowell, founder and analyst at NAND Research, told TechTarget about this case:
It is very unusual for customers to sue their suppliers. I think Broadcom has grossly underestimated the passion of their customer base, [but] it is a captive audience.
As this lawsuit shows, Broadcom's VMware has raised serious concerns among customers about ongoing support. Companies like Spinnaker Support are trying to capitalize on this by offering third-party support services.
Martin Biggs, VP and managing director of EMEA and strategic initiatives at Spinnaker, told Ars Technica that his company provides support so customers can spend time determining their next move, whether that's purchasing a VMware subscription or moving on:
VMware customers are looking for options; the vast majority of those we spoke to do not yet have a clear picture of where they want to go, but in all cases, the option of staying with VMware at the significantly increased cost is simply untenable. The challenge for many is that not paying a fee means not getting support or security for their existing investment.
VMware's support for AT&T was set to end on September 8, but the two companies have reached an agreement to continue support through October 9. A preliminary injunction hearing is scheduled for October 15.
