CA Reports 40 Percent Earnings Drop

By Paula Musich  |  Posted 2005-05-26 Print this article Print

Updated: Computer Associates executives say their efforts to improve the company's fortunes are paying off, but the company reported a 40 percent drop in earnings for its fourth fiscal quarter of 2005.

Computer Associates may have put the SEC investigation behind it, but it is not yet out of the woods if its fourth fiscal 2005 quarter is any indication. The Islandia, N.Y., software giant on Thursday afternoon reported a 40 percent drop in earnings for its fourth fiscal quarter of 2005 down to 3 cents a share, compared to 5 cents a share a year earlier. At the same time, officials at Computer Associates International Inc. disclosed that the company found a couple of new contracts that were not properly recorded beyond those already disclosed and for which CA had already restated earnings.
Revenues for the full year were $3.54 billion, up 8 percent over fiscal 2004 revenues of approximately $3.28 billion. Earnings for the year were 2 cents a share, compared to a loss of 6 cents a share for fiscal 2004.
Despite the earnings slide, John Swainson, named president and CEO of the company late last year, was upbeat in his assessment of the quarter. "We saw solid financial results for the fourth quarter and full year during a time of transition. Im enthusiastic about our future," said President and CEO John Swainson in an afternoon conference call. "Customers remain judicious in how they spend their technology budgets. Rising security threats and proliferating regulatory requirements make customers eager to work with a well-qualified partner. CA wants to be that partner," he said. The star performers in CAs product portfolio were security management, which nearly doubled in bookings over the same period a year ago, and enterprise systems management, which increased 42 percent compared to the fourth quarter of 2004. For the coming year, Swainson outlined six priority areas for the company. Those include creating strong customer partnerships. "Our goal is to be a trusted partner helping to solve customer problems," said Swainson. Other goals include becoming the leader in the enterprise systems management and security markets; aligning CA to take advantage of new market opportunities; improving financial systems and internal controls; creating a performance-based culture that rewards achievement of goals; and leveraging partners to expand CAs reach. In looking to expand the business it does through reseller partners, CA wants to increase partner-generated revenue from less than 10 percent of its total to 30 percent of its total revenue. "Our direct sales force will focus on developing true partner relationships with [CAs] 18,000 named accounts, and partners will go after the rest," said Swainson. As CA works to put its accounting scandals and executive exodus behind it, it has made great strides. Since the beginning of the year, CA has strengthened its diminished management team with the hiring of John Swainson as CEO and Bob Davis as CFO; restructured into business units with their own profit and loss responsibilities, hired former Novell CTO Alan Nugent to head up its enterprise systems management unit; added two new independent board members; and announced its plan to acquire Concord Communications Inc. Read more here about CAs reorganization. Over the full fiscal year, CA "built a top-tier management team, including a new CEO, COO, CFO... and general counsel; weve reached a deal with the DOJ to resolve the governments investigations, met our guidance, made significant investments for future growth, started implementing a new ERP system, made a 5 percent head count reduction and streamlined our procurement system," said Jeff Clarke, chief operating officer. For its first fiscal quarter of 2006, CA expects to generate revenues of between $910 million to $930 million and earnings of between 10 cents and 11 cents. For the full fiscal 2006, CA expects to earn 46 cents to 51 cents a share on revenues of between $3.8 billion to $3.9 billion. Editors Note: This story was updated to correct the companys earnings information. Check out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.

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