CA Bucks Trends, Boosts Revenues

New business model, flexible pricing, shorter contracts helping software maker weather tough economy, officials say.

Computer Associates International Inc. today reported better than a five percent boost in its second fiscal quarter revenues to $772 million a jump from $733 million in the same period last year. The positive performance helped the software maker reduce its net loss to $52 million, compared to a net loss of $291 million for the year-ago quarter.

The companys new business model, implemented two years ago, which emphasizes more flexible pricing, a strong brand focus and shorter term contracts, helped CA to weather the tough economic climate better than other its competitors, said Sanjay Kumar, president and CEO of the Islandia, N.Y company.

Customers are "looking for quick ROI more than ever before. Focus is on the tactical – they are not buying forward capacity. This is the same difficult climate we saw in [the first quarter]. Our business model with brand and customer focus is making a difference for us. Our customers continue to buy in small amounts," he said in the earnings call late today.

CAs adoption of subscription pricing resulted in new deferred subscription revenues of $394 million over 2.8 years. Annualized, that figure annualized accounts for $141 million in revenues, representing a 14 percent increase compared to the same quarter last year and a 20 percent increase over the first fiscal quarter.

Across its major product areas, CA saw a sequential increase in bookings for its enterprise management software, while some competitors such as IBMs Tivoli unit saw declines. "We believe we are taking share here," said Kumar. But its security products, after a strong first fiscal quarter, did not fair as well, and CA storage products held their own in a "tough market," said Kumar.

CA on Monday will announce a significant new version of its flagship BrightStor ARCserve Backup (Version 9.0), although it is not likely to have a large impact on revenues or earnings for a few quarters.

CA officials believe the company is on track to meet its forecast revenues for the full fiscal year of between $3.1 to $3.2 billion. But CA believes it will improve on its earnings per share forecast to hit a range of 14 to 16 cents a share, compared to its original forecast of 10 to 13 cents a share. Revenues for CAs third fiscal quarter, ending December 31, are expected to be between $770 to $790—in line with its original estimates. Earnings for the third quarter are expected to be better than expected, reaching a range of four to five cents a share, officials said