VMware pays $8M to settle SEC cease-and-desist proceedings over prior revenue disclosures 

According to the regulator the matter relates to the company’s results disclosures during fiscal years 2019 and 2020.
The headquarters of the U.S. Securities and Exchange Commission (SEC) is seen in Washington, D.C., January 28, 2021. (Photo by SAUL LOEB/AFP via Getty Images)

VMware has agreed to pay a civil penalty of $8 million to settle cease-and-desist proceedings brought against it by the Securities and Exchange Commission over prior order backlog and revenue management disclosures.

In legal documents published Monday, the regulatory body said the matter related to the technology company’s omission of material information in quarterly and annual results disclosures during its 2019 and 2020 fiscal years.

VMware has not admitted or denied any of the SEC’s findings as part of the settlement.

In its cease-and-desist complaint, the SEC said VMware had controlled the timing of certain revenue recognition by placing discretionary holds in selected sales orders. The regulator added that as part of this practice the delivery of license keys to clients was delayed.


“VMware employed discretionary holds when business objectives – including those for ‘bookings’ and revenue – had been achieved, in order not to exceed the company’s revenue guidance by too much and as a way, in the words of VMware personnel, to start the next quarter with a buffer or more momentum than it might have had otherwise,” the SEC argued.

According to the regulator, without omissions that resulted in quarter-end backlog reductions for the fiscal year 2020, VMware would have missed rather than met guidance and analyst consensus estimates for total revenue and guidance for license revenue. It would also have missed guidance for license revenue in the second quarter of that fiscal year, the SEC said.

The Securities Act of 1933 prohibits any person from directly or indirectly obtaining money or property by making any untrue statement of a material fact or any omission to state a material fact necessary to statements made.

VMware and the SEC did not respond to a request for comment.

John Hewitt Jones

Written by John Hewitt Jones

John is the managing editor of FedScoop, and was previously a reporter at Institutional Investor in New York City. He has a master’s degree in social policy from the London School of Economics and his writing has appeared in The Scotsman and The Sunday Times of London newspapers.

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