Computer Associates cuts 800 jobs as deals slow

NEW YORK: Computer Associates International Inc. said its quarterly profit more than doubled, helped by acquisitions and tax credits, but the pace of new deals slowed and the software company said it would cut 800 more jobs to reduce costs.

The company, which is emerging from civil and criminal inquiries into its accounting, said it is cutting the jobs, which represent about 5 percent of its work force, with the hope of generating savings of $75 million a year. That is on top of 800 job reductions announced in September.

CA's new management, which replaced former Chief Executive Sanjay Kumar when he was indicted on securities fraud charges, has been making acquisitions in new growth areas and downsizing other businesses to address a tough market for software sales.

"CA is very much a work in process," Chief Executive John Swainson said in a conference call.

Total bookings, which is essentially a measure of new business deals signed, fell 30 percent to $415 million. Computer Associates said that is due to the changes it made in the way it compensates its salesforce to focus on new business rather than contract renewals.

CA also said it was experiencing slower sales as customers await the release of its Unicenter mainframe management software, expected later this year.

Software for mainframes, or large computers that manage corporate systems, is one of CA's central businesses. Customers put purchases of mainframe software on hold recently as they waited for International Business Machines to upgrade its mainframes. IBM upgraded earlier this week.

"While we see this as being positive, we don't look for some sort of instantaneous jump just because they're shifting a new big box," said Swainson, a former IBM executive. "Because frankly, a lot of that is already built into our contract."

Fiscal first-quarter profit was $94 million, or 15 cents a share, up from year-earlier income of $40 million, or 7 cents a share.

Earnings excluding items were 22 cents a share, in line with analysts' average estimate according to Reuters Estimates.

Revenue, despite the recent setback, rose by 8 percent to $920 million. Computer Associates' revenue model smooths fluctuations between quarters. Much of the current-quarter revenue was from businesses signed earlier.

Computer Associates expects to post second-quarter operating earnings of 23 cents to 24 cents a share, net income of 5 cents to 6 cents a share, and revenue of $930 million to $960 million. Analysts have expected 23 cents a share.

The company also expects to take a second-quarter charge of between $50 million to $75 million, or 5 cents to 7 cents a share, for severance and associated costs.

The company raised its estimate of full-year operating earnings per share to 93 cents to 98 cents from 90 cents to 95 cents. It also expects net earnings of 46 cents to 51 cents a share and revenue of $3.8 billion to $3.9 billion.