AT&T and Broadcom near settlement in VMware support dispute

AT&T and Broadcom are close to resolving their legal dispute over VMware support services, according to a joint letter filed in the New York Supreme Court on October 11.

The letter requests a postponement of the upcoming hearing, as both sides make progress toward a settlement. The dispute, which revolves around the extension of support services following Broadcom’s acquisition of VMware, has drawn attention due to its potential impact on broader enterprise IT support contracts.

Both parties requested an adjournment of the upcoming hearing on AT&T’s motion for a preliminary injunction, stating that negotiations were advancing toward a resolution.

“The parties have been engaging in settlement discussions and we believe enough progress has been made to warrant an adjournment of the October 15, 2024, oral argument… to permit the parties additional time to seek a resolution,” the letter written by attorneys from both sides stated.

The October 11 joint letter noted that both sides are optimistic about a potential resolution, requesting the adjournment of the preliminary injunction hearing to October 22, 2024, or the next convenient date. The parties also agreed that Broadcom would continue to provide the disputed VMware support services through the hearing date and for one additional week if the hearing is scheduled within 30 days.

“Defendants agree to continue providing the support services at issue through the to-be-scheduled hearing date and for one week thereafter,” the letter emphasized​.

If the hearing cannot take place within the requested timeline, both companies have requested a virtual scheduling conference to discuss alternative dates. This move underscores both companies’ commitment to settling the dispute outside of court, avoiding prolonged litigation that could affect their broader business dealings.

Background of the dispute

This development marks a turning point in the dispute that began in early September, when AT&T filed a lawsuit against Broadcom, VMware’s new parent company, claiming that VMware was refusing to honor a prior contract to extend support services. AT&T argued that Broadcom had attempted to push the telecommunications giant into purchasing expensive new subscription services instead.

“Broadcom is attempting to bully AT&T into paying a king’s ransom for subscriptions AT&T does not want or need, or risk widespread network outages that could cripple the operations of millions of AT&T customers worldwide,” the company then stated in the filing​.

Besides, AT&T also claimed these aggressive tactics are jeopardizing vital support services for VMware software that powers its operations, including services essential to national security and emergency response.

Broadcom immediately hit back at AT&T claiming that the service provider is resorting to “sensationalism” and had long intended to stop using VMware software but delayed the move.

Broadcom, through a previously filed affidavit, confirmed it offered AT&T a discounted five-year VMware Cloud Foundation (VCF) subscription but acknowledged it would still be more expensive than AT&T’s previous support contract.

Broadcom’s affidavit stated, “The five-year VCF subscription proposal offers significant value and new technology, while also cleaning up AT&T’s messy at-risk environment, bringing everything under one umbrella.”

Despite the discount, the affidavit confirmed that AT&T would face higher costs due to the more comprehensive scope of the new deal.

Wider industry impact

The settlement discussions between AT&T and VMware are closely watched by enterprise IT customers, many of whom rely on VMware’s technology and services. The case has highlighted the challenges companies face when their support contracts come up for renewal, particularly as Broadcom moves to transition VMware customers to subscription-based services.

Many organizations, like AT&T, have complex environments with multiple versions of VMware software, and transitioning to newer subscription models could involve significant cost increases.

Although both parties are making progress, the final settlement has not yet been reached. AT&T will continue receiving support services as negotiations continue. For now, the resolution of this case could set an important precedent for future enterprise negotiations with Broadcom-owned VMware.