Fidelity Investments has settled a lawsuit with Broadcom regarding access to virtualization software essential to its business systems. The resolution ensures continued software service and removes the immediate threat of service disruption affecting millions of customers and substantial assets under management.
Key Points
- Fidelity Investments and Broadcom have settled a lawsuit over access to VMware virtualization software essential to Fidelity's operational systems.
- The lawsuit followed Broadcom's acquisition of VMware and subsequent changes to product packaging and pricing, which Fidelity contested regarding subscription renewal terms.
- The resolution guarantees uninterrupted software services critical to Fidelity’s trading platforms, managing about 50 million customers and assets under management of approximately $17.5 trillion.
In a recent development, Fidelity Investments announced an agreement to settle its legal dispute with Broadcom related to access to software integral to its operational infrastructure. This resolves a conflict that posed risks of system outages and interruptions to critical trading functions. Fidelity, an asset manager based in Boston, withdrew a lawsuit filed last November in Massachusetts state court after Broadcom consented to maintain software services for a Fidelity subsidiary, according to a spokesperson for Fidelity.
The agreement was publicized prior to a scheduled hearing that Fidelity Technology Group requested, aiming to obtain an injunction to prevent Broadcom from terminating its software access. The disputed software, provided by VMware—a company acquired by Broadcom in 2023—is used by Fidelity to virtualize and manage servers since 2005, forming a backbone for its technological operations.
Fidelity alleges that after Broadcom's acquisition of VMware, the latter modified its product offerings, consolidating virtualization software into higher-priced bundles. When renewing a subscription, Fidelity claims Broadcom refused contractual rights for renewal under previous terms, insisting on purchasing the newly bundled packages.
Fidelity, which oversees roughly 50 million client accounts and manages assets totaling approximately $17.5 trillion, emphasized the critical nature of this software access. The company warned that losing it could have triggered systemic outages, preventing customers from account access and trade execution, while also affecting employee use of essential internal systems.
This settlement averts those operational risks, with Fidelity confirming that Broadcom’s services will continue without interruption, ensuring no adverse effect on its business functions, clients, or partners. Broadcom had not issued a public response at the time of this report.
The dispute and resolution highlight significant tensions in software licensing strategies post-acquisition, with considerable implications for financial services infrastructure reliant on stable software agreements.
Risks
- Potential outages and disruptions in financial services platforms if access to critical virtualization software is lost, affecting client account access and trading operations.
- Business continuity risks stemming from vendor disputes over software licensing terms after corporate acquisitions.
- Financial services sector exposure to technology supplier contract changes impacting operational stability and compliance.