Update 01/10/2024 by Martijn van Best – If AT&T were to accept Broadcom’s offer under the new terms, it would mean a price increase of as much as 1050 percent for the telecom giant. This is according to an email submitted by AT&T as evidence in the legal dispute between the two companies. Another email even suggests that Broadcom is obstructing migration to other vendors.
The first e-mail, dated 19 August, comes from Susan A. Johnson, executive vice president and general manager of AT&T. According to The Register, the message appears to be addressed to Hock Tan, the CEO of Broadcom, although the recipient’s name is blacked out in the mail. Johnson states in the email that after a 10-year partnership, the two companies now seem to be at an ‘impasse’ regarding the VMware deal.
‘This is not how we do business’
Although the exact amounts are also blacked out, Johnson seems to suggest that the price for a five-year deal would be substantially higher than the current deal, which still assumes continuing use of Broadcom’s terminated perpetual licenses with an option to extend until September 2026. This would imply an annual price increase of 1,050 percent, which is, according to Johnson, ‘not how we expect strategic partners to engage in doing business with AT&T’.
The mail makes it clear that AT&T is seriously exploring options to migrate away from VMware. Its services have become significantly more expensive since its acquisition by Broadcom and the fundamental overhaul of its product offering that followed. Johnson’s email states that such a migration would cost around 40 million to 50 million dollars and yield quick cost savings.
Switching vendors made difficult
However, an email from an AT&T vice president, Gordon Mansfield, seems to say something quite different. Switching to another vendor would be time-consuming and costly because AT&T systems are so intertwined with the VMware infrastructure. Switching would additionally be made more difficult by Broadcom itself because ‘we understand that they are preventing some vendors from selling certain products to us’.
The case includes another email from one of AT&T’s many VPs, David J. Brickhaus. In it, he disputes Broadcom’s claim that his company uses all kinds of outdated and unsupported VMware software. While AT&T allegedly does use some end-of-life software, it would only run non-critical workloads on three percent of its servers, lacking any possibility of upgrading to newer VMware products.
AT&T is pursuing a syrupy exit strategy for VMware. In a legal dispute, the telecom giant says VMware owner Broadcom didn’t keep its end of the bargain. Needless to say, Broadcom disagrees.
In September, AT&T went to court. It sued Broadcom for breach of contract. Now more details have come out through a legal document which was obtained by The Register.
In the legal filing, Broadcom tells a New York court that AT&T still wanted to purchase a perpetual license. Such a license is no longer available. Still, AT&T is trying to ensure it still gets support for its existing VMware infrastructure by legal means. Negotiations for a new deal, even with a favorable price tag for AT&T, came to nothing, according to Broadcom.
Final push
Broadcom made substantial changes to the VMware pricing policy. The option to purchase certain software components in an à la carte fashion disappeared, with only VMware Cloud Foundation and VMware vSphere Foundation as the remaining offerings which bundle the dozens of former VMware components together.. According to Broadcom, this has made the VMware suite a more price-competitive solution for large users, which ought to include AT&T. Nonetheless, AT&T has accused Broadcom of bullying tactics and price gouging. Meanwhile, the VMware owner points to the signed contract between the two, which states that VMware may rejigger and terminate the existing license agreement at any time.
AT&T has had eight months to revamp its own IT infrastructure. Since many companies implemented their VMware exit strategy much faster, this would have been more than enough time. Therefore, Broadcom sees it as an unfair accusation from AT&T that the latter has suffered “irreparable harm.”
The suit is still in its early stages, with no clarity yet as to when a judgment may come down.