Washington 13th September : The US Securities and Exchange Commission (SEC) has slapped the enterprise cloud services provider VMware for deceiving investors by concealing the financials of the company.VMware was bought by chip maker and software manufacturer Broadcom from Dell Technologies for $61 billion in May of this year, was unable to inform investors about its practices for managing backlogs of orders which allowed the company to extend revenue into the next quarter by delaying the delivery of products to customers.
“As the SEC’s order reveals that, through misleading statements about the practices of order management, VMware deprived investors of crucial information regarding its financial health,” said Mark Cave Associate Director in the Division of Enforcement.
“Such behaviour is not in accordance with the disclosure obligations of an issuer in the securities laws of the United States,” Cave said in an interview in the late hours of Monday.
The SEC discovered that, starting in the fiscal year of 2019, VMware started delaying the distribution of keys for certain licenses on sales orders until after the end of the quarter to allow it to recognize revenues from the related licensing sales in the next quarter.
In accordance with the SEC’s order, VMware shifted tens of millions of dollars in revenue into the future quarters creating an insurance policy in the periods that were not in use and obscure the financial performance of the company as its business slowed compared to expectations in the fiscal year 2020.
Although VMware has publicly stated the fact that its backlog was “managed by a variety of factors” however, it did not disclose the investors it utilized the backlog to control the timing of the company’s revenue recognition.
The SEC declared that VMware did not comply with anti-fraud laws of the Securities Act of 1933 as in addition to certain reporting requirements of the securities laws of the United States.
“Without acknowledging or denying the facts in the SEC’s decision, VMware accepted a cease-and deter order and agreed to pay a penalty of $8 million,” it added.
na/
