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

AT&T and VMware both are “overselling” their positions against one another in the ongoing lawsuit between the two behemoth companies, a case that is “screaming for a business solution.”

That’s all according to New York Supreme Court Judge Jennifer G. Schecter, per a newly published transcript of the Oct. 23 proceedings that led Schecter to impose a temporary restraining order against VMware. 

The decision keeps VMware’s services intact within the telco for now while AT&T and VMware work toward an apparent agreement on their own. In late November, about a month after Schecter’s ruling, they reached a “settlement in principle.” Nothing further on that front has developed since. AT&T sued VMware at the end of August as it claimed the two parties had reached an “impasse” over VMware by Broadcom’s intent to withdraw its service support and hike pricing by more than 1,000%. 

“We're talking about a spread from, approximately, $3 million a year to upwards of $90 million a year,” AT&T’s lawyer, Jonathan D. Pressment, told Schecter on Oct. 23.

VMware’s attorney, Alison Pressman, maintained throughout the hearing that the new costs would cover all of AT&T’s VMware licenses and contracts. At the moment, she said, AT&T is operating on various transactional licenses and services that VMware doesn’t even offer anymore.

Related:The Broadcom VMware Acquisition: A Complete Timeline

“The environment is very disorganized, a lot of it is at risk,” Plessman told the court. “So, when AT&T talks about this big price increase, the price increase is because it is not just about the support services that have, in fact, been discontinued; they're not commercially available, they are not on the price list, there is nothing to purchase. Their arguments speculating that they're in fact still available [are] just not true.”

‘A Deal Is a Deal’

Even though there’s been little public movement on the case since Nov. 26, we do have more insight into Schecter’s take on AT&T and VMware’s arguments — including her skepticism around both parties’ assertions before she agreed to issue the restraining order rather than the preliminary injunction the telco requested.

“[A] deal is a deal,” Schecter told VMware by Broadcom’s legal team. “You make a commitment, you let someone renew for a certain amount of time. It is not like, 'Well, we're going to change the price and we're going to change the title … and then, now, guess what, you have to pay a lot more money if you want the services.'”

At the same time, Schecter said to AT&T’s representatives, “you're in a pinch because you're relying on these services so heavily in your business. It just doesn't make commercial sense to me that that is actually what end of availability could mean between sophisticated parties.”

Despite reluctance to impose a preliminary injunction on Oct. 23, Schecter did enact a temporary restraining order.

Still, Plessman pushed back. AT&T, she said, has not paid for the services VMware by Broadcom is providing “and there needs to be a mechanism to pay for the services.”

“[T]hat is the business decision that I do leave up to you,” Schecter responded.

The judge reiterated that “nothing is to change” with the temporary restraining order in effect pending her issuance of a preliminary injunction.

“It is not a question of what will I do on this motion; I am going to grant the preliminary injunction,” Schecter said. “The question just will be, what the undertaking will be, what the language will be, what the duration will be.”

Again, Schecter has not made any more public steps toward a preliminary injunction as AT&T and VMware have indicated they intend to settle their differences outside of court.

But There’s Change for VMware − and Its Partners − Elsewhere

The Oct. 23 transcript publication comes amid recent new activity concerning VMware by Broadcom that partners will want to know.

First, reports started circulating that the virtualization provider is losing another big customer, Beeks Group, a cloud operator in the U.K. Beeks says it has moved the majority of its virtual machines off VMware and over to OpenNebula because Broadcom tried to raise its prices by 1,000%.

Second, Broadcom has reversed course on its intent to manage its top 2,000 strategic accounts without partner intervention. According to a variety of reports that appear to have started with Canalys chief analyst Alastair Edwards, Broadcom has made a “stunning U-turn” on that plan, as Edwards wrote on LinkedIn about a month ago. 

“VMware is now cutting direct accounts to just 500 worldwide, and doubling down on its partners as it seeks to drive a major focus on customer adoption and retention,” Edwards wrote. “This potentially delivers several billion dollars of sales back to its partner channel.”

Broadcom’s move comes as multiple companies and channel partners have reported leaving VMware in the wake of Broadcom’s policy and pricing changes, as Edwards noted.

“CEO Hock Tan has pursued a clear objective to strip out layers of cost and complexity in the [VMware] business, and return it to strong growth and profitability,” he wrote. “But so far this has come at the expense of customer and partner relationships.”

Broadcom, for its part, has only said in the same statement to various media outlets that it “continues to work on behalf of our partners to create new value in capturing the market opportunity for private cloud. … Broadcom does not have an official, static number of direct strategic accounts. The number of customers with whom we work directly changes over time.” 

Finally, Edwards pointed out some more changes VMware by Broadcom has enacted for partners that have flown under the radar. Those include:

Go here for the timeline of events that has transpired since Broadcom wrapped its $61 billion purchase of VMware a little more than a year ago.