VMware revenue hit by $76m overcharging scandal

VMware and distie alleged to have charged US government too much for its kit over six years

VMware's second-quarter revenue was dented by a $76m (£48.6m) settlement it had to pay the US government to resolve allegations that it and a distributor overcharged a department for six years.

For the three months to 30 June, sales at the virtualisation giant grew four per cent annually to $1.52bn, but they would have been higher were it not for a $76m settlement it paid to the US Department of Justice (DoJ) last month. Net income in Q2 was up five per cent to $172m over the same period.

Details of the settlement emerged in a DoJ document released at the end of June. The files claim VMware and one of its channel partners, Carahsoft, agreed to pay up to resolve allegations the duo violated the False Claims Act by overcharging the government for the vendor's kit.

"The settlement resolves allegations that VMware and Carahsoft made false statements to the government in connection with the sale of VMware products and services under Carahsoft's MAS [Multiple Award Schedule] contract," the document said.

"These false statements allegedly concealed the companies' commercial pricing practices and enabled the companies to overcharge the government for VMware's products and services from 2007 through 2013."

VMware's chief financial officer Jonathan Chadwick said on a conference call: "I hope we don't have another GSA settlement," before clarifying that the payment was a one-off item which will not happen again after admitting VMware CEO Pat Gelsinger was "giving [him] a look" to drive home the point.

In a statement, Gelsinger said VMware has had a good first half.

"Our second-quarter results are solid, building on our solid start to the year in Q1," he said. "We experienced strong industry validation from industry analysts, partners and customers throughout the quarter."