CA quarterly revenue rise but with loss

Wei Gu

NEW YORK: Computer Associates (CA) International Ltd., posted better-than-expected quarterly results and said full-year earnings will exceed Wall Street estimates, aided by cost-cutting.

For the fiscal second quarter ended September 30, the company had a net loss of $96 million, or 16 cents a share, including charges for 800 job cuts and a $225 million payment to settle a two-year criminal accounting probe.

In the year-earlier quarter it had a net loss of $90 million, or 16 cents a share, after charges to settle almost all of its shareholder lawsuits.

Operating earnings, excluding a tax benefit of four cents share, would have been 18 cents a share, higher than analysts' average estimate of 17 cents a share.

Revenue rose six percent to $855 million. Excluding the impact of the weak dollar, which increases the value of overseas sales when they are converted into dollars, revenue increased three percent.

"The company has some trouble increasing its sales, so the answer to it is to cut costs," Nitsan Hargil, an analyst with Friedman Billings Ramsey said, adding that the numbers look OK.

CA, which issued a revenue warning last quarter, said this quarter it signed 10 contracts in excess of $10 million, up from two last year. Its major competitor, IBM, earlier this week posted a five percent software revenue increase.

Bookings, or new software sales, increased by 70 percent. Excluding sales to resellers, bookings were up 60 percent.

Storage software has shown its first booking increase in several quarters. Security software and life cycle management have been major growth drivers.






"Large enterprise agreements that had been lingering have begun to come back," said Bill Snyder, an analyst with Meta Group.





"But there is an overall downward pressure on mainframe prices - it's something that's going to have legs over the next several years."

For fiscal 2005 ending in March, CA forecast operating earnings of 79 cents to 82 cents a share, compared with Wall Street's average estimate of 74 cents a share. The company sees revenue of $3.425 billion to $3.475 billion, compared with the Wall Street view for revenue of $3.46 billion.

For its fiscal third-quarter ending December, Computer Associates forecast operating earnings of 18 cents to 19 cents a share and revenue of $850 million to $865 million, compared with analysts' estimates of earnings of 18 cents a share and revenue of $870.7 million.

Computer Associates would not update investors on its search for a permanent chief executive officer and chief financial officer. Its former CEO Sanjay Kumar was indicted last month on charges including securities fraud last month related to a $2.2 billion accounting scandal at the company.

The company, which signed a deferred prosecution agreement with the government, said it would submit five names for an independent examiner and pay the first installment of $75 million to the restitution funds by Friday.

"We are providing investigators all the information and resources necessary to obtain disgorgement of compensation paid to wrongdoers," Interim CEO Ken Cron said in a conference call.