Kumar Exit Prompts CA User Worries

As accounting inquiries inch closer to the ex-CEO, once-confident CA customers are expressing reservations about dealing with a vendor with damaged credibility.

Efforts by Computer Associates International Inc. to be seen as both a technology vendor and a trusted partner are in peril after a week of scandal-driven turmoil culminating with the companys top executive being stripped of his leadership position.

The board of directors removal of Sanjay Kumar from his roles as chairman and CEO also robs CA of the most public face of what many users considered a renaissance at the company. As a trio of investigations into accounting practices inches closer to Kumar himself, once-confident CA customers are expressing reservations about dealing with a vendor with damaged credibility.

CA officials announced last week that Kumar had stepped down from the CEO spot and resigned from the board. In a move still being questioned internally at CA, according to sources, Kumar was given the newly created position of chief software architect. Lewis Ranieri, lead independent director on the board, was elected chairman of the board for the Islandia, N.Y., software company.

/zimages/6/28571.gifClick here to read more about Kumars new role at CA.

CA officials said that a search is on for a replacement for Kumar and that an interim CEO will be named.

According to sources close to the situation, CAs board late last week offered the interim CEO position to fellow board member Kenneth Cron, former CEO of Vivendi Universal Games. Insiders say that a permanent CEO will almost certainly come from outside CA and that the board could start making preliminary contacts with candidates as soon as this week.

Employees at CA said the executive changes—including Kumars demotion—have been expected for some time. But many expressed surprise that the board allowed Kumar to remain at the company, even if only in an ill-defined, largely ceremonial role.

One employee said that many at the company had expected Kumar to be fired outright and that the prevailing sentiment inside CA is that Kumar is unlikely to stay on long, regardless of the outcome of two separate and ongoing investigations being conducted by the Securities and Exchange Commission and the Department of Justice. "Everybody is expecting more changes. This is not the end of this," said the employee, who requested anonymity. "The fact that [Kumar] is still here is the shocker, not his resignation."

Some CA customers said the accumulation of the accounting scandal, the executive reshufflings and the continued denials of wrongdoing from senior management has shaken their faith.

"After reviewing the information released about the accounting procedures and issues with CA executives, I have thoughts of Enron [Corp.]. It appears that top executives believe that they are impervious to scrutiny and are above the law," said Chuck Slenker, systems engineer at Hartford Hospital, part of Hartford Healthcare Corp., in Hartford, Conn., and a large CA customer.

"Unfortunately, these executives dont realize the effects their actions have on the customers, employees and companies that employ them. The products that CA makes and we use, I feel, have not been affected—only the trust in the company itself," Slenker said. "Since we have invested thousands of dollars in the products that CA makes, I can only be reminded what was the outcome of Enron. I hope that situation does not happen, but you still think about it. It makes you wonder what happened to the morals and ethics people used to have in business."

Such feelings are not lost on those still tasked with selling CAs products. "A reseller told me less than a month ago he still has to pull CA products out [of new software contracts] because certain customers would demand that. If thats still going on, its more than a little bit of disagreement," said one source close to CA, who asked not to be named.

Next page: More bad news could come from personal or corporate indictments.