SEC charges VMware with misleading investors by obscuring financial performance

By Kanishka Singh

WASHINGTON (Reuters) -The U.S. Securities and Trade Fee mentioned on Monday it has charged cloud computing firm VMware Inc with deceptive buyers by obscuring its monetary efficiency.

The corporate was charged with deceptive buyers about its order backlog administration practices, which the company mentioned enabled it to push income into future quarters by delaying product deliveries to prospects, thereby concealing the corporate’s slowing efficiency relative to its projections.

With out admitting or denying the findings within the SEC’s order, VMware consented to a cease-and-desist order and pays an $8 million penalty, the SEC mentioned. VMware confirmed in a press release of its personal that it reached a settlement with the SEC and agreed to pay the penalty with out admitting or denying the SEC’s findings.

The SEC mentioned it discovered that starting in fiscal-year 2019, VMware started delaying the supply of license keys on some gross sales orders till simply after quarter-end in order that it may acknowledge income from the corresponding license gross sales within the following quarter.

“VMware shifted tens of tens of millions of {dollars} in income into future quarters, constructing a buffer in these durations and obscuring the corporate’s monetary efficiency as its enterprise slowed relative to projections in fiscal yr 2020,” the SEC mentioned.

“Though VMware publicly disclosed that its backlog was ‘managed primarily based upon a number of issues,’ it didn’t disclose to buyers that it used the backlog to handle the timing of the corporate’s income recognition,” the regulator added.

In Could, chipmaker Broadcom Inc mentioned it should purchase VMware in a $61 billion cash-and inventory deal.

“The SEC Employees has confirmed that it doesn’t intend to suggest enforcement motion in opposition to any present or former VMware officers or different member of administration in reference to the investigation, and this settlement concludes the matter,” VMware mentioned in its assertion on Monday.

(Reporting by Kanishka Singh in Washington and Ismail Shakil in OttawaEditing by Jonathan Oatis and Matthew Lewis)