How SUSE Deviated from Internal Controls While Warning About Sales Risk
Introduction
Software firm SUSE, a provider for companies like Microsoft and BMW, announced in its 2022 annual report that it was implementing stricter controls over commercial deals to ensure proper authorization.
Company Background
Founded in 1992, SUSE had been publicly traded since 2021 and aimed to align itself with other listed companies in the sector by creating a deal desk to vet commercial and contractual terms.
Newly Identified Risk
In its annual report, SUSE highlighted “Commercial governance” as a newly identified risk, ranking it as “possible” with a “high” impact. The company expressed concerns that it may enter into high-risk or commercially inappropriate deals without effective control over the Sales organization.
Impact on Share Price
SUSE’s majority shareholder, EQT, offered to take the software company private after it slashed sales targets, resulting in a 47% decrease in share value from the 2021 IPO level.
Creation of Deal Desk
The deal desk, created to review any deals greater than $500,000, was a joint decision made by SUSE’s executive team and the company’s board, according to lawyers for SUSE’s former CEO, Melissa Di Donato.
Examples of Decision-Making
- Di Donato greenlit the terms of a $1.4 million sale to South African utility Eskom, bypassing the deal desk’s scrutiny to expedite the process.
- SUSE discounted a sale to Bank of New York Mellon by over 90% from the listed price, signaling efforts to clinch deals amid slowing sales growth.
Response to Concerns
Di Donato’s lawyers refuted claims that she reached the Eskom agreement without submitting it for the deal desk’s approval, while also emphasizing that quarter-end pressures affected all companies.
Litigation
SUSE and Thomson Reuters are involved in litigation over the use of SUSE software products, with SUSE claiming that Thomson Reuters breached the terms governing its use of SUSE software products.
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