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CA posts big revenue drop for 2002 fiscal year

CA posts big revenue drop for 2002 fiscal year

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Computer Associates International Inc. (CA) Tuesday posted revenue of US$772 million for its just-ended fourth quarter and $2.96 billion for its 2002 fiscal year, in a financial report filled with figures restated after a change in the company's accounting methods.

CA, in Islandia, New York, moved in late 2000 to a new accounting model that recognizes revenue from its contracts throughout the life of the contract rather than all at once when the deal is signed. Beginning with its fourth quarter, which ended March 31, CA is reflecting cash received in advance of scheduled revenue recognition -- before the company had planned to recognize the payment -- as a liability on its balance sheet. The company reclassified prior year results to conform to that accounting method.

The company's revenue in the fourth quarter climbed to $772 million, from $730 million in 2001's fourth quarter. Its net loss for the quarter, using U.S. Generally Accepted Accounting Principles (GAAP), was $238 million, down from $410 million in last year's fourth quarter. Excluding ongoing costs of past acquisitions and special charges, the company posted net operating income of $3 million and broke even in terms of diluted operating earnings per share.

CA's revenue for its 2002 fiscal year dropped dramatically from its 2001 total, falling to $2.96 billion from $4.190 billion. The 2001 revenue figure was restated down, but only slightly, from $4.198 billion. CA's net loss for the year, based on GAAP, grew from $591 million in 2001 to $1.1 billion in 2002. Excluding continuing costs of past acquisitions, as well as one-time losses and gains, CA had a $265 million net operating loss and a diluted operating loss per share of $0.46 for the year.

Because of CA's change in its business model in 2000, its GAAP 2001 fiscal year results include quarters calculated under both the old and new models and are not directly comparable to its 2002 results, which include operations only under the new model.

To reconcile the two sets of figures, CA offered in its supplemental information pro forma calculations showing revenue of $5.8 billion for the 2002 fiscal year and $5.56 billion in 2001. The pro forma numbers factor in a portion of revenue CA booked up front in prior years as contracts were signed.

CA also offered a pro forma analysis of its current quarterly results in its supplemental information, but did not include the pro forma figures in its financial results press release, as it has in previous quarters. CA's accounting practices have made it the subject of federal probes by the U.S. Securities and Exchange Commission (SEC) and Department of Justice (DOJ), along with several class-action lawsuits.

CA Chief Executive Officer Sanjay Kumar briefly addressed the issue of those investigations during a conference call Tuesday with analysts and press following CA's financial release. The company continues to voluntarily cooperate with the SEC and DOJ and maintains its belief that its accounting complies with all applicable laws and regulations, Kumar said.

"In a difficult environment, we thought the company performed really well," he said during the call, citing both the "distractions" CA has faced and the depressed IT market. In addition to the federal inquiries, CA recently faced another salvo from the organizer of a 2001 proxy fight, Ranger Governance Ltd., which in March sent a letter to CA's board urging it to oust several top executives.

As in past quarters, sales of enterprise management software drove CA's revenue, accounting for 43 percent of its fourth-quarter total. CA's professional services revenue continued to dwindle, dropping from $105 million in the year-earlier quarter to $73 million in 2002's fourth quarter, with increased product revenue filling the gap.


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