CA cuts losses in Q3, but misses revenue mark

CA cuts losses in Q3, but misses revenue mark

Computer Associates International (CA) has reported a third fiscal quarter revenue figure below that expected by Wall Street expectations, but the business software provider said that multi-million dollar licenses and the strong performance of its European businesses allowed it to narrow its losses.

The company reported a net loss of $US44 million on revenue of $US778 million for the fiscal quarter ended December 31, 2002. This compared with a net loss of $US231 million - or US0.40 a share -on revenue of $US747 million for the same period last year.

“We saw some evidence of an improving economic environment, yet customers continued to be prudent with their technology investments," said Sanjay Kumar, CA chairman and chief executive officer.

The company cited its flexible licensing model, an increase in license transactions and strong European sales in helping it narrow losses for the quarter. However, it said that the adoption of new accounting rules at the beginning of its fiscal year that eliminated the amortisation of goodwill and other intangible assets affected its results for the period.

Kumar said business was good in Italy, France and Germany. The Asia-Pacific region and Latin America "held steady." Thirty-eight percent of CA's revenue came from customers outside of North America.

CA said it continued to benefit from its deferred subscription revenue model introduced about two years ago, in which customers typically sign up for multiyear contracts. CA recognised the money over the life of the contracts, which averaged out to slightly less than three years each, Kumar said.

Forty-seven per cent of CA's revenue came from such contracts in the quarter just ended, he said, up from 37 per cent a year earlier. But Kumar said that CA was willing to offer pretty much whatever licensing terms a customer wanted. "Whatever way a customer wants to buy software is generally OK with us," he said.

Kumar said he expected big things from Linux in the years ahead. Earlier in the week, the company said it had formed an internal Linux technology group and released versions of about a dozen management, security and storage products for the open-source OS.

"We believe Linux will be a factor in many companies ... ... In the end, economics will drive customers to this platform," Kumar said.

Proprietary operating systems would "be around and successful", but for simple tasks such as file and print serving, as well as for emerging areas such as Web services, Linux increasingly would be the platform of choice, he said.

Products for "distributed" - or client/server - environments made up 46 per cent of CA's revenue in the quarter, or $US358 million. Mainframe products brought in 45 per cent of revenue. Professional services accounted for 8 per cent of revenue ($US62 million).

"The mainframe portion of the business remains strong," Kumar said.

By product line, almost half of CA's revenue came from sales of its enterprise management products, with software for doing business online pulling in 21 per cent of revenue and security software accounting for 20 per cent.

Kumar said CA wanted to be recognized more for its storage products, and the company was planning a marketing drive to promote this area of its business.

"We don't have mindshare in security and that's something we're working on," he said.

The company's indirect business, in which it sold products through channel partners, didn't perform as well as expected in the quarter, and CA made some management changes in that area as a result, Kumar said. The services side of the business also had "room for improvement," he said.

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