CA revenue grows, net loss narrows

Computer Associates International Inc. (CA) posted Tuesday a 5 percent year-over-year revenue increase for its second fiscal quarter, while narrowing its net loss.

CA generated revenue of US$772 million, up from $733 million in 2001's second quarter. Net loss for the quarter, ended Sept. 30, was $52 million, down from last year's $291 million net loss.

CA's net operating income for the quarter was $22 million, which translates to per-share operating income of $0.04. The consensus estimate of analysts polled by Thomson Financial/First Call was for operating earnings per share of $0.02.

Customers are buying, but on an "as-needed" basis, CA Chief Executive Officer Sanjay Kumar said in a statement.

"Customers are focused on very tactical solutions to help address problems today, and as we have noted previously, they are not buying forward capacity," he later elaborated, in a conference call with analysts following the company's financial results release.

Kumar praised CA's subscription-focused licensing model as well suited to the current buying climate, in which customers appear to be seeking shorter-term deals. The average duration of CA's new contracts signed during the second quarter is 2.8 years, the company said, slightly shorter than its target three-year average duration goal.

The most recent quarter was the first in a long while with no North American deal signed for more than $10 million, CA executives noted at the time. This quarter, CA signed two deals of that size in North America, and two in Europe, executives said.

CA's professional services revenue continued dwindling, dropping 18.9 percent to $60 million, down from $74 million in the year-ago quarter.

Last quarter, Kumar identified the sector as a problem area for CA, and said the company would be making changes. In the statement accompanying Tuesday's results release, Kumar cited reduced industry spending on consulting services as one factor behind the unit's continuing revenue decline.

CA's practice of allowing its partners to pick up the services revenue associated with some software sales also affects its own professional services revenue, Kumar said during the conference call. One way CA hopes to reverse the downward trend of its services revenue is through packages bundling together software and services for several major products, he said.

CA's product sales mix was essentially unchanged from the year-ago quarter. Enterprise management software comprised 42 percent of year-to-date new sales, with e-business integration software in the No. 2 spot, comprising 21 percent of new sales. Storage software accounted for 19 percent of new sales, and security software accounted for 12 percent.

Storage software sales will likely pick up during the current quarter, executives forecast, as CA prepares to release next week version 9 of its ArcServe backup software.

"I think we have a large client base that is looking forward to that release. Interest levels are extremely high," CA Chief Financial Officer Ira Zar said during the conference call, noting that this will be the first major ArcServe release in several years.

Kumar upped CA's operating earnings forecast for the 2003 fiscal year, ending March 31, saying the company now expects to generate operating earnings per share of $0.14 to $0.16. The mean estimate of analysts polled by Thomson Financial/First Call was for per-share operating earnings of $0.12.

He also increased CA's forecast for its current fiscal quarter, ending Dec. 31. CA now expects per-share operating earnings of $0.04 to $0.05, he said, ahead of analyst estimates of $0.03 per-share operating earnings. Revenue for the quarter is forecast to be in the range of $770 million to $790 million, Kumar said.

He touched briefly during the conference call on the ongoing investigation of CA's past accounting practices being jointly conducted by the U.S. Securities and Exchange Commission and the U.S. Department of Justice. CA continues to cooperate with the inquiry, he said, providing no new information about the status of scope of the investigation.

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