CA names interim CEO, adds COO, restates earnings

Computer Associates (CA) has appointed board member, Kenneth Cron, its interim chief executive officer (CEO), and promoted recent recruit, Jeff Clarke, to chief operating officer (COO).

Cron will lead CA as it searches for a permanent CEO to succeed Sanjay Kumar, who stepped down last week under pressure stemming from government investigations into accounting violations several years ago at CA.

That scandal, which has already forced out more than a dozen CA executives and led to criminal changes against four, claimed another member of CA's management team yesterday: The company announced that worldwide sales head, Stephen Richards, had left the company. A 15-year veteran of CA, Richards was in charge of CA's sales team during the period in which the company said some contracts were backdated to inflate quarterly earnings.

Richards will be succeeded by Greg Corgan, who joined CA last year and oversaw North American sales.

Clarke's promotion to COO fills a spot left empty since Kumar moved from president and COO to CEO in August 2000. The company had been operating since then without a clear number-two executive. Clarke, formerly HP's head of global operations, joined CA last month as its chief financial officer (CFO).

Clarke will continue as CFO on an interim basis while CA launches a search for a permanent CFO, to run in parallel with its CEO search, executives said.

Board member Lewis Ranieri, promoted to chairman last week, said the board was now interviewing executive search firms. Cron could be at the helm of CA for a significant length of time.

"We want to do this search well rather than quickly," Ranieri said. "We have no sense of crisis."

CA said its development, technology services, legal and communication departments will report to Cron, in addition to Clarke. Reporting directly to Clarke are its sales, partnership, business development, marketing, finance and human resources units. Kumar remains with CA as its chief software architect.

CA has also announced a long-expected restatement of its financial results for its 2000 fiscal year, the period during which the company and government investigators say the bookkeeping manipulations occurred. More surprisingly, it also restated results from its 2001 fiscal year. The US Securities and Exchange Commission (SEC) and US Department of Justice (DOJ), which are jointly investigating and prosecuting the violations, had so far only publicly questioned CA's accounting from its 2000 fiscal year, which ended March 31, 2000.

CA said it prematurely recorded $US1.78 billion in revenue in 2000, more than the $US1.4 billion the SEC previously identified. Because the accounting plan involved shifting sales among quarters rather than falsifying revenue, the restatements affected CA's reported revenue for the year only slightly. In the restated results, filed on Monday with the SEC, CA's reported revenue for 2000 dropped from $US6.094 billion to $US6.092 billion.

In CA's 2001 fiscal year, $445 million was improperly recorded. The company's restated revenue rose from $US4.19 billion to $US4.75 billion. The snowball of sales recorded in advance of their completion tapered off in the 2001 fiscal year, as CA adjusted to a late 2000 change in its business and accounting model to recognise revenue from software sales gradually over the life of contracts rather than all at once as the contracts were signed.

CA's financials for fiscal years 2002, 2003 and the first nine months of 2004 are unaffected by its restatements, and the company said it still expected to report its fourth quarter and 2004 fiscal year results as previously scheduled, on May 12.

CA spent more than $US30 million on its internal investigation and compliance with the government investigations, executives said.

The new management team emphasised the extensive overhaul underway at CA to change the company's culture and implement safeguards. "The practices we uncovered are utterly unacceptable," Ranieri said. "CA is implementing remedial steps ... to be sure the practices that made these restatements necessary are never repeated."

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