SEC investigating how IBM accounts for cloud revenue

Summary:IBM historically doesn't break out its cloud computing revenue, but has targeted sales of $7 billion a year by the end of 2015.

The Securities and Exchange Commission is investigating how IBM reports its cloud revenue, the company said.

In IBM's quarter filing with the SEC, the company said that regulators started an investigation in May. IBM is cooperating with the probe.

IBM didn't provide any further details about the probe. IBM historically doesn't break out its cloud computing revenue, but has targeted sales of $7 billion a year by the end of 2015.

Here's the $7 billion in revenue from cloud computing slide from February.

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Analysts say that the SEC probe isn't likely to amount to much. Topeka Capital Markets analyst Brian J. White said in a research note:

There are many different drivers of cloud revenue and thus the revenue recognition can be "cloudy" at times; however, we do not expect this to be a material issue for IBM.

Indeed, the SEC investigation should be an interesting exercise for IBM as well as tech vendors that offer cloud, software and infrastructure such as HP or Oracle. For instance, is a mainframe used for a private cloud classified as hardware or cloud revenue. Some areas---a software as a service offering---are clear cut. Other categories such as services are murky.

Topics: IBM, Cloud

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Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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