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Services drag on CA's fiscal 2000 earnings

Services drag on CA's fiscal 2000 earnings

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Computer Associates reported record results for its fourth quarter last week, though it admitted its professional services and European operations both under performed.

"I wouldn't be telling the truth if I said I wasn't disappointed" in the performance of professional services, said Sanjay Kumar, president and chief operating officer of the US-based software giant.

Even though CA's professional services revenue for the period ended March 31 grew 24 per cent, to $115 million, the growth was below CA's expectations and predictions.

In recent months, CA officials have denied rumours that new service contracts were slowing and that many members of its professional services staff were idle.

Kumar laid some of the blame on CA's Millennium Watch program, through which it offered free services to top customers over the January 1 rollover period, writing off those expenses as a "goodwill" builder.

Another factor was CA's decision not to renew some services contracts it inherited from its acquisition of Platinum Technology International last June, "because we didn't think they were good business", Kumar said.

Wall Street analysts were also disappointed by CA's services growth. "I think the overall value of Platinum in expanding CA's services business was [unintentionally] exaggerated," said Damian Rinaldi, an analyst at First Albany in Boston. For example, he said, a major Platinum training contract "didn't produce the payback" that was expected.

CA's product and service diversity was undoubtedly a factor in helping the company achieve stellar results for the year, but the services slump is disquieting, said financial advisor Arthur Gillis, president of Texas-based Computer Based Solutions Inc. "The lifeblood of a good software company is its professional services," he said.


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