AT&T, VMware Settle; VMware Loses Ingram Micro

AT&T and VMware are settling their legal fight, just as the industry is learning that VMware and Ingram Micro are parting ways. 

In other words, it’s a big week for VMware and its parent company, Broadcom.

AT&T, VMware Lawsuit Settled

Attorneys for AT&T and VMware have informed the New York State Supreme Court that they have agreed on settlement terms. 

“[T]he parties have settled this action and intend to submit to the court a stipulation of discontinuance,” the Dec. 13 letter reads.

The move was anticipated. In late November, AT&T and VMware’s lawyers told Judge Jennifer G. Schecter they had reached a “settlement in principle.”

AT&T filed its case against VMware in late August. The two companies had failed to negotiate contract extensions and renewals for support services within the telco’s global environment. AT&T accused VMware of trying to “bully” it into paying 1,050% more in the wake of the $61 billion Broadcom acquisition. But VMware by Broadcom said AT&T “bait and switched” its position, provoking the upheaval.

A number of VMware customers have reported soaring rates in their costs once the Broadcom-VMware deal closed and Broadcom hastened the switch to subscription licensing. Beeks Group is the latest to publicly migrate to a VMware rival, and among the largest. The UK-based cloud operator says VMware by Broadcom tried to hike its prices by 1,000%.

Related:Judge: AT&T-VMware Case ‘Screaming for a Business Solution’

Terms of the settlement between AT&T and VMware are not yet known, though Schecter seems likely to sign off on them. The judge already told AT&T and VMware in an Oct. 23 hearing that their case was “screaming for a business solution.”

AT&T tells Channel Futures it has no comment on settling with VMware. A VMware by Broadcom spokesperson confirmed that AT&T and VMware “have agreed to resolve the matters raised in the litigation."

VMware, Ingram Micro Parting Ways

Meanwhile, VMware by Broadcom is losing a key distributor.

According to a report from The Register, Ingram Micro has decided to end its VMware relationship in most of its regions — and soon.

In a statement provided to Channel Futures and other media, Ingram Micro confirmed the news. The distributor said it will “no longer be doing business with Broadcom” and will have “limited engagement” with VMware in select territories as of early January.

The reason why boils down to this: "We were unable to reach an agreement with Broadcom that would help our customers deliver the best technology outcomes now and in the future while providing an appropriate shareholder return," the statement reads.

Related:Broadcom, Arrow Sign North American Agreement for VMware

Ingram Micro said it has informed its vendors and customers of the move, noting, "the future of business is focused on transforming relationships, not just transacting sales."

VMware by Broadcom issued a statement to Channel Futures on this development after we first published this article. A company spokesperson told us that Broadcom still is working to "refine its VMware software distribution landscape," as part of the process that began in January of this year.

"Our ongoing efforts continue as we align our ecosystem with our strategic goals and the desire to create deeper relationships with fewer distributors across Broadcom’s software businesses," the spokesperson said. "While Ingram has been a valued partner, our evolving business priorities and the need for a more streamlined and focused distribution network have necessitated this change."

Ingram Micro says VMware did not make up a huge portion of its revenue. The distributor told Channel Futures and other outlets that the change is not material to its business. VMware, on the other hand, seems to have contributed significantly to Broadcom’s latest earnings. CEO Hock Tan told investors on a call last week that Broadcom has raised VMware’s margins from less than 30% to 70%, and boosted quarter-over-quarter subscription sales by $200 million, all while cutting costs from $2.4 billion to $1.2 billion.

Resellers who only sold VMware through Ingram Micro will need to find new partners if they plan to keep the virtualization brand in their portfolios. 

The loss of a major distributor brand for VMware comes after a year of sweeping changes enacted by new owner Broadcom. Indeed, the chipmaker kicked off 2024 with a wholesale revamp of VMware’s channel program, trimming its reseller rolls to 18,000 “active” partners and limiting or removing access to the top 2,000 enterprise accounts. In recent weeks, Broadcom has rolled back its restrictions regarding those high-end customers, giving back partner permissions to serve 1,500 of those 2,000 buyers.