VMware Accused of Fraud by SEC, Reaches $8 Million Settlement

VMware and the US SEC settle a fraud case for $8 million. The virtualization software company has also agreed to a cease and desist. With the settlement, VMware ‘neither denies nor admits’ guilt.

The US company is alleged to have misled investors by purposely delaying delivery of products during fiscal years 2019 and 2020 until just after the end of certain quarters, according to the Securities and Exchange Commission. This would artificially shift sales to subsequent quarters to disguise stagnating growth. “VMware has shifted tens of millions of dollars in revenue to future quarters, creating a buffer that was used to mask the expected disappointing figures for fiscal 2020,” the SEC said.

The regulator acknowledges that VMware did make public that it used a so-called backlog of deliveries “based on various considerations,” but that investors were not told that this arrangement was being used to influence the timing of revenue postings. This would have been misleading to investors.

In a own press release states VMware agreed to the “civil monetary penalty” without acknowledging or confirming the SEC’s experience. The company writes: “The SEC’s investigation has not revealed that [VMware] has not adhered to generally accepted accounting practices. Accordingly, the government agency has not provided any indication that it will recommend prosecuting any VMware employees involved.”

Broadcom has been in the process of acquiring VMware since the middle of this year, which cost the tech giant a purchase price of about 53 billion euros at the time. Since 2018, VMware has averaged roughly $10 billion in annual revenue. The company is best known for its virtualization software and cloud applications.

Update, 11:18 a.m.: The original post claimed that Broadcom’s acquisition of VMware has already been completed, which is technically incorrect. The article has been tightened.