IBM ordered to pay $1.6B to software firm BMC for nabbing AT&T contract

A federal judge has ordered IBM to pay $1.6 billion in damages to BMC, a private software company that is both IBM’s partner and competitor. BMC sued IBM in 2017 after AT&T — a huge client for both companies — dumped BMC’s mainframe software products in favor of IBM’s own software. BMC alleged the deal violated the careful agreement it made with IBM to work with mutual customers. 

“IBM is one of the largest technology companies in the world— and it exploited BMC’s justifiable reliance for its own gain, cementing its abdication of good faith and fair dealing in the service of its own self-interest,” US District Judge Gray Miller wrote in his decision. 

Since 2008, AT&T was one of BMC’s biggest mainframe software clients; the telco giant used BMC’s software on its IBM mainframe servers. Meanwhile, IBM’s revenue from AT&T is also substantial. As of 2017, IBM received more than $100 million per month from AT&T. Over the last seven years, AT&T accounted for at least $1 billion of IBM’s outsourcing division’s revenue.

The judge sided with BMC, ordering IBM to pay for contractual damages, punitive damages, plus interest. 

IBM plans to appeal the ruling, calling it “entirely unsupported by fact and law.” In a statement, the company added, “The decision to remove BMC Software technology from its mainframes rested solely with AT&T, as was recognized by the Court and confirmed in testimony from AT&T representatives admitted at trial.”

BMC did not immediately respond to a request for comment.