IBM investigated over cloud revenue reporting

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IBM investigated over cloud revenue reporting

SEC probes accounting.

US regulators are investigating how IBM reports revenue from its cloud computing business, but the company said it stands by its accounting principles.

IBM said it learned of the investigation, being conducted by the US Securities and Exchange Commission, in May. The company made the disclosure in its quarterly report filed with the SEC. It gave no details on the probe.

The probe underscores confusion about how cloud revenue should be written up - the inclusion of software, server, storage, network or databases used in different layers of the cloud don't all have clear-cut revenue recognition policies.

IBM, which does not break out its cloud computing revenue separately, has said it aims to generate US$7 billion annually in revenue from cloud services by the end of 2015.

Topeka Capital Markets analyst Brian White said the SEC probe likely would not affect IBM much.

"At first glance, this may appear to be a concerning issue; however, we believe cloud revenue recognition can be 'cloudy' at times, given the nascent stages of its development, and we do not expect a material impact on IBM from this investigation," he said.

IBM said it was cooperating with the SEC.

The company is also under investigation by the US Department of Justice over allegations of illegal activity by a former IBM employee in Poland, as well as transactions in Argentina, Bangladesh and Ukraine.

The Justice Department is also still seeking information regarding the company's global compliance with the Foreign Corrupt Practices Act and its public sector business.

Two other investigations were recently settled.

On July 25 a federal judge signed off on a 2011 settlement IBM made with US regulators over charges of foreign bribery.

IBM in March 2011 agreed to pay US$10 million to resolve SEC charges over improper gifts to government officials in South Korea and China.

IBM shares were down 0.2 percent to US$195.58 in midday trading.

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