When tech company Broadcom agreed to acquire VMware for approximately $61 billion in cash and stock – while also assuming almost $8 billion in debt – it marked one of the largest acquisitions of a technology company in history. The deal closed in November 2023, bringing VMware into Broadcom’s software portfolio.
And with the acquisition, change quickly followed. Spoiler: It’s bad.
Over the last two years, Beeman & Muchmore has been retained by multiple companies (and spoken with many friends and colleagues) trying to get a handle on what Broadcom seems to want and, further, how they are going about getting whatever it is they want. While we have seen and learned a lot over the last two years, a caveat regarding the below is necessary – “mercurial” barely even begins to describe the volatility and unpredictability of Broadcom’s scattered approach. Even more than with most vendors, Broadcom’s approach appears to follow the whims of the personalities involved, with profound escalation and existential threats fired off in a seemingly knee-jerk fashion.
While retaining experienced counsel is always a good idea when interfacing with a software vendor, it is especially important with Broadcom. It only takes an instant to lose valuable property rights and/or to find your company mired in a fast-moving and contentious dispute that it is unprepared for.
Broadcom Eliminated Perpetual Licenses.Broadcom’s biggest change was a move to eliminate perpetual licenses in favor of subscription-only offerings. Don’t take our word for it – Broadcom has been explicit in its intentions:
“As part of our transition to subscription and a simplified portfolio, beginning today, we will no longer sell perpetual licenses,” it said. “All offerings will continue to be available as subscriptions going forward. Additionally, we are ending the sale of support and subscription renewals for perpetual offerings beginning today.”
In theory, existing perpetual licenses remain intact – only Broadcom refuses to renew support for perpetual licenses. However, there are scores of reports of different tactics that Broadcom is undertaking intended to deprive licensees of their valuable perpetual licenses. Diligence is essential in protecting your company’s interests.
Broadcom Switched to Only Offering Bundled Products. The other major change – and a direct outcome of the above – is that Broadcom consolidated VMware’s product lineup into a smaller set of bundled offerings. Just weeks after the finalized deal, customers could no longer purchase individual VMware products but would instead be forced to acquire software as time-restricted, bundled subscriptions. Shifting from a portfolio of over 8,000 products to only four primary product packages, Broadcom aimed to cut $1 billion from VMware’s quarterly spending. Numerous standalone licenses were withdrawn – with considerable pricing implications and with a disproportionate financial impact on users.
Broadcom marketed both changes in December 2023 as a “dramatic simplification.”
A 2024 survey of 300 North American IT directors who were VMware customers captured the industry’s unease. Notably, every survey respondent anticipated price increases. Seventy-three percent expected costs to more than double. As well, smaller cloud service providers were claiming to already be witnessing a tenfold cost increase, with some complaining of price increases of 500 and 600 percent.
Despite these survey responses, most of the IT professionals surveyed planned to stay with VMware either partially (43%) or fully (40%). Fast forward to 2025 with Forbes reporting that customers were either desperate for VMware alternatives or reluctantly accepting Broadcom’s new terms. Forbes shared, “Once the gold standard for enterprise virtualization, VMware is now at the center of a mass exodus.” Meanwhile, Broadcom continues to hedge its bets on companies sticking with VMware over competing solutions.
Two prominent compliance and revenue-increasing tactics have surfaced since Broadcom’s acquisition of VWware, showing just how far the company is willing to go to uphold its interpretation of licensing terms: cease-and-desist letters and audit notices. According to Memesita, “What began as a push to clamp down on unauthorized usage of its virtualization software is now raising serious questions about fairness, transparency, and whether Broadcom’s tactics are crossing legal boundaries.”
Cease-and-desist Letters. One of the first aggressive steps Broadcom has taken is to send rapid fire cease-and-desist letters to organizations that it suspects are continuing to use VMware products under expired support contracts. These letters – often signed by Broadcom executives – explicitly instruct recipients to stop using updates, patches, or any maintenance releases issued after the support expiration date. Below are some key points:
To some, the letters feel punitive in nature when arriving soon after license expiration.
Per Ars Technica,
Some customers of Members IT Group, a managed services provider (MSP) in Canada, have received this letter, despite not receiving VMware updates since their support contracts expired, CTO Dean Colpitts told Ars. One customer, he said, received a letter six days after their support contract expired.
and
Some users who reported receiving a letter from Broadcom said they ended up getting legal teams involved. Ars has also seen confusion online, with some people thinking that the letter means Broadcom perceives that they’ve broken their agreement with VMware. However, it seems that Broadcom is sending these letters to companies soon after their support contracts have expired, regardless of whether they continue to use (or not use) VMware.
Audit Notice Letters. The second tactic of compliance enforcement that Broadcom has embraced since acquiring VMware is launching formal audits on those customers who are continuing to use perpetual licenses without support contracts (even, at times, those that have purchased subscription licenses for some of their licensing needs). In addition to – or sometimes in lieu of – cease-and-desist letters, certain organizations have received notices that they have been selected for a software licensing audit. The purpose, according to Broadcom, is to verify that the customer’s use of VMware products aligns with their licensing entitlements, including correct counts of licenses and adherence to support terms.
Adding to the complication, Broadcom is enlisting Connor Consulting to conduct the audits. In our experience, the introduction of a third party into the complex and contentious auditing process brings with it confusion and uncertainty – as the line between the two entities becomes increasingly blurred, and confidentiality considerations come to the forefront.
One security professional who provided Ars Technica with their letter shared the following:
“This already impacts us security-wise because we can no longer get updates (unless the CVSS score is critical).”
and
“Because we are focusing on saving costs and are on a pretty tight financial budget, this will likely have impact on the salary negotiations or even layoffs of employees. Currently, we have some very stressed IT managers [and] legal department [employees] …”
Together, the use of both tactics by Broadcom points to a more legally framed approach to compliance.
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Stay tuned for Part 2 coming out next week when we will discuss Broadcom’s aggressive approach to software licensing enforcement, their various legal battles, and what your company should be doing to protect itself.
In the meantime, feel free to reach out to us. We are always eager to hear from our friends and colleagues about their experiences and to share insights and observations.
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