AT&T has launched a lawsuit against Broadcom, alleging that company has not upheld a support agreement for VMware software. Filed in the New York Supreme Court, the suit claims that Broadcom's refusal to extend support threatens serious disruptions, potentially impacting national security and essential services for customers.
Details of the Contractual Dispute
The complaint filed by AT&T outlines that the company holds perpetual licenses for VMware software, supported under a contract ending on September 8. According to AT&T, an option to extend this support for two additional years exists within the original agreement. However, AT&T asserts that Broadcom is not acknowledging this extension unless AT&T buys extra subscription services and software.
Broadcom has reportedly tied continued support to AT&T purchasing numerous subscription services and software packages, which AT&T claims are unnecessary and burdensome. The telecom operator states that integrating these additional services would result in substantial costs and contractual complications.
National Security Concerns
The complaint underscores that some of the 8,600 servers running AT&T's 75,000 virtual machines serve national security and public safety entities, including the Office of the President. Without extended support, AT&T warns of potential extensive network outages that could disrupt operations for millions of customers worldwide.
AT&T's attorneys describe Broadcom's actions as “an attempt to bully AT&T into paying a king's ransom for subscriptions AT&T does not want or need,” categorizing the suit as a stand against extortionate practices.
Broadcom's Response and Business Strategy
VMware, now part of Broadcom, asserts that it “strongly disagrees with the allegations” and believes it will prevail in court. A spokesperson noted that VMware has been moving towards a subscription-based model for years, a strategy initiated before the Broadcom acquisition. The transition aims to offer customers more choices and flexibility for managing complex tech environments.
Broadcom completed its $61 billion acquisition of VMware last November and subsequently reduced VMware's product offerings from 8,000 SKUs to four bundles, switching to subscription licensing. AT&T's complaint echoes concerns that were raised when the deal was first announced in May 2022. AT&T states it obtained the right to renew support services for up to two more years, according to an August 2022 amendment. By choosing to extend support for at least one more year, AT&T alleges Broadcom is disregarding this provision.
The New York Supreme Court has ordered Broadcom to respond to AT&T's complaint within 20 days. AT&T is seeking a court order to prevent Broadcom from discontinuing its support services and a declaration affirming AT&T's right to renew these services under the August 2022 agreement. The outcome of this conflict could significantly influence Broadcom's business methods and its relations with other major clients.
