The U.S. Securities & Exchange Commission announced that it has filed charges against VMware Inc, a cloud computing company, for allegedly deceiving investors by concealing the company’s financial performance.
The company was accused of deceiving investors by hiding its declining performance relative to predictions through the use of order backlog management procedures, which the agency said allowed it to shift revenues into future quarters by postponing product delivery to consumers.
VMware agreed to a cease-and-desist order as well as a $8 million penalty, the SEC said, without admitting or rejecting the findings in the order. Without acknowledging or contesting the SEC’s conclusions, VMware stated in its own statement that it had achieved a settlement with SEC & consented to pay the penalty.
The SEC claimed to have discovered that VMware delayed the delivery of license keys on certain sales orders until shortly after the end of the quarter so that it could book revenue from corresponding license sales in the preceding quarter. This practice allegedly began in the current fiscal year.
“VMware shifted tens of millions of dollars in revenue into future quarters, building a buffer in those periods and obscuring the company’s financial performance as its business slowed relative to projections in the fiscal year 2020,” said the SEC.
“Although VMware publicly disclosed that its backlog was ‘managed based upon multiple considerations,’ it did not reveal to investors that it used the backlog to manage the timing of the company’s revenue recognition,” added the regulator.
In May, chipmaker Broadcom Inc. announced that it would acquire VMware in a cash & stock transaction valued at $61 billion.
“The SEC Staff has confirmed that it does not intend to recommend enforcement action against any current or former VMware officers or other members of management in connection with the investigation, and this settlement concludes the matter,” on Monday VMware said in its statement.