CA Announces Layoffs, Doubled EPS

The company attributes its decreased total bookings in fiscal Q1 to its revamped sales compensation plan, which focuses on increasing new product sales rather than customer retention.

CA announced Wednesday that it is cutting 800 jobs as part of a restructuring effort, and at the same time reported an 8 percent revenue rise to $920 million and earnings per share of 15 cents for its first fiscal quarter of 2006.

The 5 percent workforce reduction, which will cut jobs worldwide, is intended to improve productivity and simplify Computer Associates International Inc.s wide-ranging product portfolio in research and development. The aim is also to improve sales performance and back-office efficiency.

About a third of the restructuring effort addresses redundancies in positions and facilities as a result of CAs acquisitions during the quarter, which included Concord Communications Inc., among others.

/zimages/1/28571.gifCA fortifies Unicenter with tools from its Concord Communications acquisition. Read more here.

Despite the gains in the Islandia, N.Y. companys revenue and the fact that its earnings per share more than doubled, CA realized a 30 percent decline in total bookings for the quarter over the same period a year ago.

Officials attributed that drop to a change in CAs sales compensation plan, which was redesigned to spur new product sales rather than focus on re-signing existing customers.

/zimages/1/28571.gifClick here to read about CAs military anti-spyware contract.

Officials attributed part of the weakness to a coming transition to a major new release of CAs Unicenter enterprise systems management software. Unicenter 11, which is being beta tested at about 100 customer sites, is expected to ship by years end.

"Our Q1 results are satisfactory—especially in the midst of a challenging economic and competitive environment. CA is very much a work in progress," said CEO John Swainson in a conference call late on Wednesday.

"Were making significant changes to our company, we have refocused the sales team on growth and re-energized our marketing activities, and we are continually looking for ways to strengthen the company and align it with the needs of our customers. We still have work ahead of us to ensure growth, improve processes and simplify our company," Swainson said.

Swainson characterized the IT spending environment as "strengthening, but very inconsistent. Customer acquisition is taking longer. Customers are having detailed bakeoffs and pilots before doing full rollouts. Europe is showing early signs of turning around. North America market demand is strong, but we got off to a slower start given the changes in our sales force compensation plan," he said.

For the full fiscal year, CA increased its earnings guidance from a range of 90 to 95 cents a share up to a range of 93 to 98 cents a share. CA expects revenue for its second fiscal quarter of 2006 to fall between $930 to $960 million.

During the quarter CA also announced its intent to acquire IT governance provider Niku. That deal is expected to close in the next month.