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CA shows revenue growth but cuts sales forecast

CA shows revenue growth but cuts sales forecast

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Computer Associates International (CA) released quarterly financial results on Thursday meeting its reduced expectations, but in an indication it sees continuing problems ahead, lowered its guidance for the rest of its fiscal year.

The Islandia, New York, software maker reported revenue of US$860 (AU$1,202) million, up 9 percent from last year's quarter.

CA initially expected revenue of US$865 (AU$1,209) million to US$885 (AU$1,237) million for the quarter, but reduced that forecast earlier this month. The company blamed weak performance by its services business and effects of its subscription accounting for the shortfall. A higher-than-anticipated number of subscription contract renewals, which shifts revenue to later quarters, reduced the subscription revenue recorded in the current one, according to executives. The quarter, the first of CA's 2005 fiscal year, ended June 30.

CA's net income for the quarter was US$53 (AU$74) million, or US$0.09 (AU$0.13) per share, up from US$8 (AU$11) billion, or US$0.01 per share, in the year-ago quarter. Excluding acquisition amortization and a charge related to litigation settlement, CA had per-share operating earnings of US$0.21(AU$0.29), above its earlier forecast and the US$0.18 (AU$0.25) consensus estimate of analysts polled by Thomson First Call.

CA trimmed its revenue expectations for the ongoing quarter, which ends September 30, to US$830 (AU$1,159.8) million to US$850 (AU$1,187.79) million. Thomson First Call's mean estimate was for revenue of US$868 (AU$1,212.96) million.

CA cut its full-year revenue forecast to between US$3.4 (AU$4.75) billion and US$3.5 (AU$4.89) billion. It had earlier predicted full-year revenue of US$3.5 (AU$4.89) billion to US$3.7(AU$5.2) billion.

CA's services business turned in a 7 percent drop in revenue, to US$55 (AU$76.85) million, rather than the double-digit percentage growth CA had expected, Chief Operating Officer Jeff Clarke said in a conference call with analysts. The company will make changes there, including altering its sales incentive plans, he said.

While services revenue was weaker than expected, the remaining gap in CA's lowered revenue expectations came from accounting issues, not sales shortfalls, Clarke said. The company has adjusted its forecasts to account for the increase in subscription renewals and the resulting extended billing timeframe.

"We didn't see the challenges closing business that many other people in the industry saw," Clarke said. "Budgets are tight. It's very competitive out there, but I believe we're holding our own."

Interim Chief Executive Officer Ken Cron said he was pleased with CA's "solid" results and revenue growth.

Executives had no news about CA's progress in reaching a settlement with the government over an extensive accounting fraud carried out several years ago, which has led to charges against a number of former company executives. Chairman Lewis Ranieri continues to lead negotiations on that front, Cron said.


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