CA considers acquisitions

NEW YORK: Computer Associates International Ltd., which has stayed off the acquisition trail after a 1990s merger binge, would now consider deals that fit existing businesses, Chairman and Chief Executive, Sanjay Kumar said on Thursday.

"I think it is a possibility that we will participate in consolidation. We're not afraid of doing an acquisition," Kumar told the Reuters Technology, Media and Telecommunications Summit in New York.

"Don't take that to mean I'm shopping for one today," he said. But "if something strategic came around ... I wouldn't be afraid of doing it."

Consolidation has begun to pick up in the software sector, including Oracle Corp.'s $9.4 billion hostile takeover bid for PeopleSoft Inc. Veritas Software Corp., Oracles' competitor in storage software, acquired Ejasent Inc. last month.

CA made more than 50 acquisitions over its 27-year history, but in the past four years it had has done only a half a dozen small deals, mostly to complement existing technology.

Kumar said the company could get back into the merger game as it gains more confidence with its customers and would consider acquisitions that would help it expand existing businesses, such as storage software or security, or complementary businesses.

"An easy extension would be taking on an additional piece of storage software to be able to be a broader competitor," or in an "adjacent market that we may not be in today," he said

But Computer Associates, which is being probed by the government in a $1 billion accounting scandal, may not be free to make big deals before the issue settles, said analysts.

In the long-running probe, the U.S. Securities and Exchange Commission is looking at how the Islandia, New York, company books revenue, questioning its practice of logging contract revenue received after the end of a quarter.

"The company's audit committee continues the process of completing its work," Kumar said. "In the meantime, the company continues to supply information that is requested by the government."

CA has received a formal notice from the SEC that it is considering recommending civil enforcement related to the accounting probe. The company said it will respond in a few weeks.

IMPROVING BUSINESS CLIMATE

Meanwhile, Kumar said the business climate is improving, with corporations willing to spend again on technology -- even if not at the levels seen in the 1990s tech boom.

"I feel 2004 will be better for the tech industry than 2003. I think customers are more confident about wanting to spend," he said. "I am by no means suggesting we are back to the good old days of spending... I don't believe we will ever get back to that."

Computer Associates has traditionally focused on system management software, but demand for software running on big computers has slowed due to a tough technology market. It also has faced aggressive pricing pressure from bigger rival International Business Machines Corp.

Kumar said he expects pricing pressure to stay level this year.

The company, which has made a big push into corporate security software and storage software business, will soon have a wireless security product, Kumar said.

It is also hiring in the areas of R&D and sales, he said. Key product areas are infrastructure management and security, where most hires will be made in the United States and Australia, Kumar added.

© Reuters