International Business Machines Corp (IBM) disclosed that the US Securities and Exchange Commission (SEC) is investigating how its cloud computing business generates revenues. The company pointed this out in a disclosure in the quarterly report it filed with the regulatory body but gave no specifics. IBM does not separate its cloud computing revenues from its total revenues, but has declared that they plan to make US$7 billion a year by the end of 2015 from the service.
Analysts, however, are not concerned that the probe would have a lot of impact on IBM. Brian White, an analyst of Topeka Capital Markets, felt this way. "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. It was also inferred that the different layers involved in cloud computing also do not have well-defined rules to recognize revenues.
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