CA posts Q3 revenue drop but narrowing net loss

Computer Associates International Inc. (CA) posted a US$231 million net loss for its third fiscal quarter of 2002 amid declining revenue from a year ago.

In late 2000, CA revamped its business model, encouraging customers to purchase software through subscriptions and reporting its revenue ratably over the term of its contracts. This quarter marks the first for which year-over-year comparisons are available under CA's new business model.

While CA's overall revenue for the quarter dropped from a year ago, its product sales revenue increased 2.3 percent, to $678 million. However, the gain was offset by a 40.1 percent drop in CA's professional services revenue, from $120 million in the third quarter of 2001 to $71 million in the current quarter.

On a pro forma basis, calculating the value of historical contracts on a ratable basis and excluding amortization of acquisitions and special one-time charges, CA posted earnings per share of $0.71, significantly higher than the consensus estimate of $0.60 compiled by Thomson Financial/First Call. CA posted pro forma revenue of $1.45 billion for the quarter, and $417 million in net operating income.

Using standard accounting principles, CA had revenue for the quarter of $749 million, down from $783 million a year ago. The net loss figure of $231 million is an improvement on its loss of $342 million in the third quarter of 2001.

Sales of CA's enterprise management software, including its flagship Unicenter system, contributed 41 percent of CA's revenue for the quarter, the company said. Storage sales made up 19 percent, while security software accounted for 11 percent -- figures that have stayed constant for the first nine months of CA's 2002 fiscal year.

CA saw "no massive spending burst" during the quarter, tracking instead a gradual build-up in customer sales, Chief Executive Officer Sanjay Kumar said in a conference call with analysts following the financial release. CA anticipates higher revenue in its fourth quarter, a seasonally strong period for the company, but it doesn't expect to top last year's figure, Kumar said.

CA has recently stepped up its marketing efforts, with a batch of television commercials and a reorganization of its product categories. The company sees "a strong source of new revenue" in opportunities to "cross-sell our technology and up-sell our technology" to existing customers, Kumar said. He listed enterprise management, high-end storage, and security software as three areas where CA has opportunities to grow sales.

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