A California technology company has been charged with making misleading statements to investors that obscured the firm’s financial performance, the Securities and Exchange Commission announced.
The SEC found that the conduct of VMware Inc., based in Palo Alto, violated the antifraud provisions of the Securities Act of 1933 as well as certain reporting provisions of the federal securities laws.
The alleged violations involved VMware’s order backlog management practices. Beginning in fiscal year 2019, the SEC said VMware delayed the delivery of license keys on some of its sales orders to customers until shortly after the end of the quarter. By doing this, the company was able to push revenue from the license sales into the following quarter and in the process, moved tens of millions of dollars of revenue into future quarters.
The SEC’s order found that the buffer of extra revenue concealed the fact that VMware’s financial performance was slowing down compared to what it had projected for the fiscal year 2020. It was determined that the company did not disclose to investors that the backlog of orders was being used to manage the timing of what its revenue appeared to be.
“As the SEC’s order finds, by making misleading statements about order management practices, VMware deprived investors of important information about its financial performance,” said Mark Cave, Associate Director in the Division of Enforcement. “Such conduct is incompatible with an issuer’s disclosure obligations under the federal securities laws.”
VMware did not admit or deny the SEC’s findings, but consented to pay an $8 million penalty while also agreeing to a cease-and-desist order.
Handling financial services disputes requires counsel with a significant understanding of the industry, the laws, rules and regulations that impact our clients and the forums in which disputes are adjudicated. At Hyman Cotter PC, our attorneys’ unparalleled litigation experience comes from leveraging their industry-specific knowledge developed from working at firms such as Morgan Stanley, UBS Financial Services, serving as outside counsel for some of the world’s largest law firms, and through prior affiliations with the SEC. For more information about our arbitration and litigation services, please contact Hyman Cotter PC at 312-291-4600 or through our online contact form.
