Legal

Twist in Tesco vs. VMware case as Computacenter files claim against Broadcom, Dell

As negotiations stalled, Broadcom feared Tesco no longer saw it as a long-term partner

Tesco’s lawsuit against VMware has taken a twist, with Computacenter filing a claim against Broadcom and Dell.

As The Register reported in September, Tesco sued VMware’s new owner Broadcom and Computacenter for not honouring a contract that gave the supermarket giant the option to acquire software at pre-determined prices and ongoing software support services. The lawsuit named reseller Computacenter as a defendant, because Tesco had a contract with the company to acquire the necessary licenses.

Recent court filings accessed by The Register include two claims filed by Computacenter, one against Dell and the other directed at Broadcom and VMware.

Both claims state that Computacenter was a VMware reseller, that it used Dell as a distributor of VMware software, and that in 2021 Dell issued Computacenter a quote for a deal that saw Tesco seek subscriptions to VMware’s Tanzu Basic and Tanzu Mission Control products. The quote covered a five-year period but also included terms for an additional four years of support services. Computacenter calls that quote the “Tesco SOYR” because it covers “Stated Out-Year and Renewals.”

Computacenter’s claims quote communications between VMware and Computacenter in which the virtualization giant approved the quote. The reseller therefore signed a deal to provide VMware products to Tesco and argues VMware therefore “owed Computacenter an obligation to supply the relevant VMware products and services to Dell, alternatively Computacenter, at the prices set out in … Tesco’s SOYR.”

According to the filings, in October 2024 Tesco told Computacenter it wanted to exercise its rights under the SOYR.

Computacenter’s filing states that Dell responded that “due to the changes within VMware and actions by Broadcom, Dell is simply no longer able to fulfil those renewals or the pricing set out in that VMware Order.”

“We have of course sought resolution from VMware on this and many similar customer issues (in many cases dealing with fulfilment of licenses already purchased by customers rather than renewals) but their new policies simply prevent us from being able to fulfil this order through the existing route to market…”

Computacenter therefore wrote to Broadcom, which responded “these solutions and related support are now end of life and are not available to purchase.”

Broadcom also pointed to VMware’s standard contract, which gave it the right “to end of life products and related support” meaning “we are unable [to] extend an offer for the renewal requested by Tesco.”

Computacenter argues that Dell and VMware/Broadcom have breached their contractual obligations to it, so if Tesco wins its case against the reseller it wants damages and/or specific performance of the contracts – which would mean providing the licenses and support the British retailer contracted to acquire.

Tense negotiations

Broadcom has filed its defense against Tesco, in which it argues “Tesco’s premise in seeking to exercise the Renewal Provisions is fundamentally misconceived and its claims have no legal basis.”

The chips-and-code giant makes that argument because its licenses mean Tesco never owned the products for which it had perpetual licenses, and Computacenter had no obligations to provide VMware software under the Tesco SOYR. The defense also argues that Broadcom can’t provide products it no longer sells, and has the right not to sell them.

Broadcom’s defense also details negotiations with Tesco, which appear to have been somewhat testy.

“Broadcom put forward a Strategic Proposal dated 12 July 2024 which offered Tesco a package of mainframe and virtualisation software that Broadcom considered would meet Tesco’s needs,” the defense document states. The proposed deal runs for seven years.

Broadcom points out that it is also “prepared to propose to Tesco licensing arrangements on a product-by-product basis, without any obligation for Tesco to purchase all products together as part of a strategic proposal, and has at all material times been prepared to make such product-by-product proposal.” But that deal would be for a shorter term than the deal outlined in the Strategic Proposal.

Tesco seems to be angry about the situation, as Broadcom’s defense states the supermarket giant “has failed to meaningfully address any of Broadcom’s proposals, leading us to conclude that Tesco no longer views Broadcom as a long-term partner.”

VMware hates extended support

Broadcom’s public position on these matters is that customers will be better off moving to its VMware Cloud Foundation private cloud platform as it will provide them with more efficient and powerful IT infrastructure, making persistence with old VMware products a poor use of corporate resources.

The Register understands Broadcom may have another motive, as sources tell us the company finds it very difficult to profitably provide extended support.

The issues in the Tesco case are similar to those in the dispute between Broadcom and the Ministry of Infrastructure and Water Management in the Netherlands. In that case, courts ordered Broadcom to honor a contract and provide VMware support for an extra two years.

Tesco’s case also considers issues touched on in a case between Broadcom and Siemens, which The Register notes is currently the subject of a motion to dismiss proceedings – suggesting the parties came to an agreement.

The Tesco/Broadcom/Computacenter/Dell case continues. ®