Ranger Fires Volley at CA

 
 
By Stan Gibson  |  Posted 2002-03-28
 
 
 
In a renewal of hostilities after last summers bitter proxy battle, dissident shareholders called once again for the ouster of top management at Computer Associates International Inc.

In a letter to CAs board of directors on behalf of Ranger Governance Ltd., a Dallas-based investment company founded and controlled by Sam Wyly, resignations were requested of CA Chairman Charles Wang, President and CEO Sanjay Kumar, and Chief Financial Officer Ira Zar.

The letter was signed by Stephen Perkins, who is managing partner at Ranger Governance, which holds options on CA stock valued at $30 million. Wyly attempted last summer to replace Wang, Kumar and several other directors with his own slate. The move was defeated in a shareholder proxy vote in August. In a press conference after the vote, Wyly did not rule out the possibility of further action.

The letter asserted that IT managers continue to distrust the company and that CAs top management lacks integrity and has failed in performance. It likened the present CA to the IBM of 1993, when IBMs board moved to replace then-chairman John Akers with Louis Gerstner. "Mr. Gerstner … replaced an old culture IBMer--not unlike our request to replace todays old culture Kumar." The letter accused the company of "Enron-style accounting," citing compensation packages for top management.

Kimberly Caughey, equity analyst at Parker/Hunter Inc., in Pittsburgh, disagreed. "I think Sanjay Kumar is doing an especially good job. He has refocused the company on customers," she said.

Damian Rinaldi, an analyst at First Albany Corp. in Stamford, Conn., conceded that CA is not growing, as asserted by Wyly in the letter, but noted, "Thats consistent with a number of companies in IT." He added, "Should all high-tech CEOs be fired?"

The letter also noted current Securities and Exchange Commission and FBI investigations of the company. In addition, it asserted that the value of the company has "disintegrated by approximately $6.6 billion" since last summers proxy battle.

This week, within days of the letter, CA followed through on several promises it made to keep shareholders in line during last years battle. The company named two outside directors, Walter Scheultze, former chief accountant to the SEC and chief accountant of the commissions division of enforcement; and Jay Lorsch, the Louis Kirstein professor of human relations at the Harvard Business School. Lorsch had been consulting CA on governance practices.

"Its good for shareholders and customers for these people to be added to the board," said Caughey.

CA officials said the moves were not in response to the Ranger Governance letter. However, Rinaldi offered, "The timing seems to be unusually odd."

In a statement, CA officials said, "While we recognize that the company--like many others--has faced some unusual challenges in this current environment, we believe Mr. Perkins letter is misleading, self-serving and inaccurate."

The statement also contended that CAs accounting practices are "GAAP compliant and considered transparent by accounting experts." It added that the company is gaining new customers and that customer satisfaction is increasing, a response to criticisms first leveled by Wyly last year and reiterated in the letter.

"We regret that Messrs Perkins and Wyly appear once again to be trying to call CA into question as a way of pursuing a personal vendetta. This only hurts shareholders. We believe very strongly that CA is on the right track to create long-term shareholder value and we will release our formal response to Mr. Perkins in due course," the statement said.

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