VMware called out after apparently offering this major customer a huge price increase

By James On Oct 2, 2024

AT&T has accused VMware of proposing a staggering 1,050% price increase under Broadcom’s new ownership, leading to a legal dispute between the two companies.

The claim was shared in a legal document filed by AT&T, which alleges that Broadcom failed to fulfill an earlier contract that allowed the telecom giant to extend its support for VMware software for another two years.

Confirmation of AT&T’s frustration with Broadcom was shared in a letter from AT&T EVP Susan A. Johnson, addressed to Broadcom CEO Hock Tan, shared by The registry.

AT&T faces a 1,050% VMware price hike

In the letter, Johnson called the proposed price increase extreme and unexpected given the companies’ strategic partnership.

AT&T has also raised concerns about the difficulties of migrating from VMware, despite having been exploring alternative solutions for almost a year. Because VMware is deeply integrated into AT&T’s networking operations, a migration would prove expensive (between $40 and $50 million) and time-consuming.

“AT&T has decided to pursue a legal strategy, along with a disciplined plan to invest to migrate away, all of which will soon become public,” Johnson added.

Despite sharing concerns about unfair treatment and plans to migrate away from VMware, Johnson said the company would be willing to “accept any reasonable offer.”

More broadly, AT&T isn’t the only company complaining about the drastic changes Broadcom has made to its acquired VMware business. Not long after the acquisition, VMware’s perpetual licenses were terminated, and in the months that followed, customers became increasingly vocal about their dissatisfaction.

Civo recently confirmed that more than half (52%) of VMware customers wanted to migrate due to the unrest.

Several Broadcom executives, including CEO Hock Tan, have spoken out about the changes in an effort to reassure customers, but they have met with relatively little success so far. A company spokesperson said this Ny Breaking in an email:

“Broadcom strongly disagrees with the allegations and is confident that we will prevail in the legal proceedings. VMware has been in the process of transitioning to a subscription model, the standard for the software industry, for several years, beginning before its acquisition by Broadcom. Our focus will continue to be on offering our customers choice and flexibility while helping them tackle their most complex technology challenges.”