Facing SEC Probe, IBM Stands by Accounting Methods for Reporting Cloud Revenue

Facing a U.S. Securities and Exchange Commission (SEC) investigation into how it reports revenue from offsite cloud services, IBM said it stands by its accounting methods.

In a July 31 SEC filing, IBM said the company is cooperating with the SEC probe, which began in May.

“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.”

The revenue from IBM’s cloud services, which include storing customers’ data and software applications remotely, is booked based on “generally accepted accounting principles,” according to Ed Barbini, a spokesman for Armonk, N.Y.-based IBM.

“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,” Barbini said, according to Bloomberg.

Along with its second-quarter financial results, IBM reported that cloud-related sales rose 70 percent in the first half of 2013 from a year earlier, but it did not provide actual sales figures. IBM has publically said that it expects cloud revenue to reach $7 billion by the end of 2015. In the July 31 SEC filing, the company didn’t provide details on what information the SEC was seeking.

In June, IBM unveiled new cloud services, which are being marketed directly to senior-level executives beyond the traditional model of doing business with chief information officers (CIOs).

IBM has invested $4 billion in Software as a Service (SaaS) acquisitions, including Coremetrics for Web analytics, Unica for marketing operations, Sterling Commerce for B2B commerce, DemandTec for price optimization, Emptoris for strategic spend management and Kenexa for human capital management, and most recently, SoftLayer Technologies Inc., a cloud-computing storage provider.