VMware agreed to pay $8 million to settle accusations from the U.S. Securities and Exchange Commission (SEC) that it manipulated its backlog reporting to hide lackluster financial results from investors.
According to the SEC, VMware delayed the completion of some sales orders until just after the end of its fiscal quarters in order to recognize revenue from those sales in the following periods. All told, the SEC said VMware pushed “tens of millions of dollars” in revenue to future quarters using this tactic.
The agency claimed VMware’s conduct began in its fiscal 2019 and allowed the company to conceal its slowing financial performance in fiscal 2020. The investigation covered the calendar period from February 3, 2018 to January 31, 2020.
VMware reported revenue of $8.97 billion in fiscal 2019 and $10.81 billion in fiscal 2020.
“By making misleading statements about order management practices, VMware deprived investors of important information about its financial performance," Mark Cave, Associate Director in the SEC’s Division of Enforcement, said in a statement.
In striking the settlement deal, VMware neither confirmed nor denied the allegations. The company stressed in a press release that the SEC’s probe did not find it failed to comply with generally accepted accounting standards and noted the SEC isn’t planning to recommend enforcement action against any current or former executives.
“VMware believes this settlement is the right course of action for the Company and continues to be committed to operating at the highest level of integrity, including with respect to its public filings and communications with investors,” VMware stated.
The company’s decision to pay a fine to squash the probe rather than fighting the allegations comes as it works to secure approval for a $61 billion deal to be acquired by Broadcom. That transaction was announced in May.