IBM escapes SEC action on its cloud revenue reporting

US regulatory watchdog SEC will not take action against IBM following an investigation into how it reports cloud revenue

US regulatory watchdog Securities and Exchange Commission (SEC) has concluded that it will not take any enforcement action against IBM following an investigation into how Big Blue reports its cloud computing revenue.  

The Division of Enforcement of the SEC informed IBM on 30 May that it has concluded its probe into IBM’s cloud revenue reporting. “IBM was notified that based on the information to date, the Division of Enforcement does not intend to recommend any enforcement action by the Commission against IBM,” an SEC document read.

The conclusion comes a year after the regulatory watchdog launched a probe into how IBM reports cloud revenues.

The mainframe and cloud provider said it learned in May 2013 that the SEC was investigating its cloud computing revenues and that it was “cooperating with the SEC” on the matter.

"IBM's reporting of cloud revenue is the result of a rigorous and disciplined process and we are confident that the information we have provided has been consistently accurate," an IBM spokesperson told Computer Weekly at the time.

IBM's cloud investment

IBM, a traditional mainframe supplier, started building a cloud computing portfolio from 2008 to suit the changing technology landscape.

The company aims to achieve $7bn annually in cloud revenue by the end of 2015. In 2013, the cloud computing division yielded a revenue of $4.4bn.

In the first quarter of 2014, its cloud revenues were up more than 50%, it said. For cloud delivered as a service, first-quarter annual run rate of $2.3bn doubled year on year, its financial earnings report stated.

Prior to the SEC investigation, IBM did not break down its cloud revenues into revenue from cloud delivered as a service and revenue from other cloud offerings such as private clouds. The company provides a wide range of cloud delivery models – infrastructure as a service (IaaS), platform as a service (PaaS), software as a service (SaaS) and business process as a service (BPaaS), as well as helping customers build private cloud infrastructures.

Since 2007, IBM has invested $7bn into advancing its cloud initiatives and building its cloud-related portfolio. In 2013, it acquired SoftLayer Technologies, the world’s largest privately held cloud computing infrastructure provider for approximately $2bn. With SoftLayer, IBM aimed to accelerate the build-out of its public cloud infrastructure to give clients the broadest choice of cloud offerings to drive business innovation.

Just last month, IBM opened a cloud marketplace to gives IT managers and developers access to information and free trials for 100 SaaS-based applications, including its SoftLayer IaaS and Bluemix PaaS. The marketplace is also aimed to help its reseller-base to tap into an estimated $250bn revenue opportunity.

This year alone, IBM has ploughed billions of dollars into the cloud via the expansion of its cloud datacentre network for $1.2bn, the launch of its middleware PaaS offering Bluemix and its ongoing acquisition strategy.

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