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 U.S. company is alleged to have misled investors by purposely delaying delivery of products until just after the end of certain quarters during fiscal years 2019 and 2020, 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 year 2020,” the SEC said.

The regulator acknowledges that VMware did indeed 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 its own press release, VMware states that it has agreed to the “civil monetary penalty” without acknowledging or confirming the SEC’s findings. 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 at the time of about 53 billion euros. VMware has averaged roughly $10 billion in annual revenue since 2018. The company is best known for its virtualization software and cloud applications.