By Kanishka Singh
WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission said on Monday it had accused cloud computing firm VMware Inc of misleading investors by concealing its financial performance.
The company has been accused of misleading investors about its backlog management practices, which the agency says allowed it to push revenue in future quarters by delaying product deliveries to customers, masking the slowdown in the company’s performance relative to its projections.
Without admitting or denying the findings of the SEC order, VMware has consented to a cease and desist order and will pay an $8 million fine, the SEC said. VMware confirmed in a statement that it reached a settlement with the SEC and agreed to pay the fine without admitting or denying the SEC’s findings.
The SEC said it found that beginning in fiscal 2019, VMware began delaying delivery of license keys on certain orders until the end of the quarter so that it could recognize revenue from related license sales during of the following quarter.
“VMware shifted tens of millions of dollars of revenue into future quarters, buffering those periods and obscuring the company’s financial performance as its business slowed from fiscal 2020 projections” , said the SEC.
“Although VMware has publicly disclosed that its backlog is ‘managed based on multiple considerations,’ it has not disclosed to investors that it uses the backlog to manage the company’s revenue recognition schedule. business,” the regulator added.
In May, chipmaker Broadcom Inc announced it would buy VMware in a $61 billion cash and stock deal.
“SEC staff have confirmed that they do not intend to recommend enforcement action against current or former VMware executives or other members of management in connection with the investigation, and this settlement closes the matter,” VMware said in its statement on Monday.