IBM says SEC will investigate how it reports cloud revenues

IBM is the subject of a probe by the U.S. Securities and Exchange Commission into how it reports revenue related to its cloud-computing business, the vendor revealed Wednesday.

“In May 2013, IBM learned that the SEC is conducting an investigation into how IBM reports cloud revenue,” the company said in a filing with the SEC. “IBM is cooperating with the SEC in this matter.”

“IBM’s reporting of cloud revenue is the result of a rigorous and disciplined process,” IBM spokesman Ed Barbini said via email on Wednesday. “We are confident that the information we have provided has been consistently accurate.”

Further details of the investigation weren’t available.

Cloud sales were up 70 percent in the first half of this year, IBM said earlier this month. The company doesn’t provide separate quarterly figures for cloud revenue, but has said it expects the total to stand at $7 billion by 2015.

IBM has focused on infrastructure and consulting with its cloud-computing strategy, but also offers an array of cloud-based business applications. It has invested significantly in cloud-computing acquisitions as well, such as the recent purchase of public cloud infrastructure company Softlayer.

Cloud services are typically paid for on a monthly subscription basis. While customers often ink multiyear deals, vendors can’t recognize the revenue in the same way they would for a large up-front sale of hardware or perpetual software licenses.

Some vendors have begun reporting figures they say speak to the true strength of their cloud businesses. For example, SAP releases figures for its “backlog” of cloud subscription and support revenue, referring to payments that are under contract, but haven’t been invoiced yet.

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