Computer Associates confident about enjoying more stable future

Software giant Computer Associates (CA), beleaguered by financial scandal, departing executives and past shareholder revolts, is intent on a more stable and fiscally responsible future, says interim chief financial officer Mr Jeff Clarke.

Speaking from London, Mr Clarke acknowledged the firm's difficulties, which most recently saw former chief executive Mr Sanjay Kumar charged with directing an accounting fraud.

Some 14 other CA officials have either departed the company or been indicted, including former chief financial officer Mr Ira Zar, who has pleaded guilty to obstruction of justice and conspiracy to commit securities fraud.

In late, September CA also paid $225 million (€178 million) into a restitution fund as part of a settlement with federal prosecutors, which also sees the company placed on 18 months' probation.

Computer Associates admitted booking $2.2 billion in revenue incorrectly, and in April had to restate its accounts.

"The fact that we've completed our settlement signals that we're co-operating fully with the government," says Mr Clarke. "The financial problems of the past are behind us."

The former chief financial officer of Compaq and HP's vice-president of global operations, Mr Clarke was brought in from outside to take on the daunting role of restoring trust in CA's financial operations.

The markets have been forgiving towards CA, the world's biggest network software manufacturer.

They reacted favourably to CA's recent acquisition of security company Netegrity. And this week they also reacted well when the company beat analysts' expectations and reported earnings of 18 cents per share, excluding the settlement and charges for making 800 workers redundant.

Sales also beat expectations, growing 6.5 per cent, or $885 million, in the quarter ending September 30th. CA shares rose 2.8 per cent, or 76 cents, in extended trading after the report was published on Wednesday.

The company is also sitting on a healthy cash pile.

"We are an extra-strong-financially company. Even with the integrity problems of the past, our company is sitting with a strong balance sheet, with $2 billion in the bank," says Mr Clarke.

That has allowed the company to stay in acquisition mode, he says. The addition of Netegrity was calculated to give CA further strengths in the fast-growing security sector, which overall is expected to expand by 28 per cent this year.

Mr Clarke says CA believes that companies that can offer a broad portfolio of applications and services and integrate across those portfolios will survive.

CA sells 90 per cent of its software directly to clients through a salesforce of 2,500 people. But the company hopes to open up a fresh market to small and medium sized businesses by offering cut-down versions of its larger software offerings through channel partners.

"Small to medium business is the fastest growing segment in the software industry and very attractive to Computer Associates," he says.

The company is also seeing strong growth in its storage and backup offerings, he said. Linux and open source software are also high on CA's agenda: "We are very excited about open source and have made a substantial investment in that area," says Mr Clarke.

Europe is a significant part of CA's operations, with $1 billion, or 30 per cent, of total company revenue flowing in from the region.

With Mr Kenneth Kron, former chief executive of Vivendi Universal Games, in the role of CA's chief executive, the company is currently in the process of searching for a new chief executive. The process should be completed within weeks, says Mr Clarke.

The company will also pay the first $10 million of its fine today, and will hand over the names of five examiner candidates to the US government.

The company will use part of its settlement fund to pay an independent examiner to monitor its compliance with its federal agreement.

The Republic is also in the midst of an executive changeover, with former Ireland country manager Mr Matt Brennan departing. Mr Mark Bridger is acting country manager until the position is filled permanently.

CA employs 28 people in the Republic.