CA Mulls Cutting Nearly a Thousand Jobs

The software company is considering a layoff of between 800 to 1000 employees, representing about 6 percent of its work force, according to sources close to CA.

CAs financial problems continue to dog the software behemoths attempts to move its business forward.

The latest in a string of bad news is that the Islandia, N.Y., company is considering a layoff of between 800 to 1000 employees in August, according to sources close to CA.

While the restructuring plans are still in flux, according to sources, such a layoff would represent 5 or 6 percent of CAs work force.

The company in late June told Wall Street analysts that it found new stock options problems as well as the understatement of some $40 million in revenue.

Those problems could require that CA restate hundreds of millions of dollars in past financial results.

As Wall Street awaits CAs delayed 10K filing for fiscal 2006, expected now to be released by July 31, analysts are unsure of what to expect.

"They have surprised us quite a bit over the last three to six months," said Gregg Moskowitz, senior research analyst at Susquehanna Financial Group in New York.

"A lot of top lieutenants are not there; they are working through things like the ERP implementation and the sales compensation issue is at the top of list. I didnt expect this extent [of problems]."

CAs list of recent problems include missing a June 29 deadline for filing the fiscal 2006 10K, the reorganization of its sales force and the departure of its top sales executive Greg Corgan.

There was also the departure "by mutual agreement" of Chief Financial Officer Bob Davis and the departure of Chief Operations Officer Jeff Clarke last spring.

Those come on top of a misstep in CAs sales force compensation program in which some employees received double commissions.

CA has since replaced Clarke with Michael Christensen, and it named its corporate controller Robert Cirabisi as interim CFO.

Although sources did not know where the cuts would come from, Susquehannas Moskowitz has some ideas.

"If they were to cut, Id suspect it would go across a number of areas. Theyve spent over the past year $700 million in R&D. Thats roughly 18 percent of revenue. Thats big. So thats one area they may look to trim. And on the sales and marketing side where they dont see attractive growth opportunities, they may rationalize there as well," Moskowitz said.

/zimages/5/28571.gifTo read more about CAs CFO departure, click here.

One source close to CA, who asked not to be named, said: "I think they are at a juncture where they are deciding what to do. Can they grow the company or do they make it more profitable? Those are two competing goals that are mutually exclusive right now. They announced a $2 billion stock buyback. To me that means they are leaning toward profitability."

One source also suggested that cuts will come from the sales force.

CA had seemed to have put its troubled past behind it with CEO John Swainson at the helm, following the completion of an SEC investigation into past CA accounting irregularities.

That investigation resulted in former President and CEO Sanjay Kumar pleading guilty to securities fraud in April of 2006.

A handful of other former CA executives also pled guilty to similar charges, and the company itself admitted to fraudulent accounting practices. It accepted a deferred prosecution agreement and was fined $225 million.

"For a while, that had a lot of positive momentum. They made good strategic acquisitions and didnt pay [too much] for them," Moskowitz said.

"At the same time the mainframe business has been an anchor on growth. Acquisitions in the distributed [systems] space have done well, but they are small pieces of the pie and havent moved the needle on growth for the company," he added.

CA officials would not comment on the layoffs. "We dont comment on rumor or speculation," said a CA spokesperson.

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