Company exceeds earnings expectations, shows solid bookings for the quarter
Software maker CA Thursday reported more than $1 billion in revenue for its fiscal third quarter, giving the company and industry watchers cause for cautious optimism.
Software maker CA Thursday reported more than $1 billion in revenue for its fiscal third quarter, giving the company and industry watchers cause for cautious optimism.
Revenue rose 4 % in the third quarter of fiscal 2007, ended Dec. 31, 2006, although the company saw its net income fall 7% to $52 million compared with $56 million in the year-ago quarter. Earnings per share (EPS) were $0.09, down from the previous year’s $0.10. With financial watchers estimating CA would report revenue around $985 million, the results exceed expectation.
“I am pleased with our third-quarter performance,” John Swainson, CA president and CEO, said in a statement. He described three months in which the company witnessed “healthy demand’ for its enterprise IT management software, particularly around technologies it had acquired. Revenue from professional services grew 11% over the year-ago quarter.
The results have financial services firm Goldman Sachs putting renewed confidence in CA.
“CA reported strong bookings and cash flow that handily exceeded our estimates, helped by a number of large contract renewals,” Goldman Sachs reported Friday. “Much of what we were looking for in our January 3, 2007 upgrade was supplied, and this renews our confidence in management, particularly the new CFO, to instill better operational discipline.”
CFO Nancy Cooper, also an executive vice president, joined CA in August 2006. Prior to joining CA, Cooper served as CFO for IMS Health Incorporated, the world’s leading provider of market intelligence to the pharmaceutical and healthcare industries.
The company also reported yesterday that its net income was down 14% to $50 million compared with the third quarter of fiscal 2006.
CA’s realignment of its sales force, which began last year, helped the company to retain, renew and expand key contracts, notably six license agreements with an aggregate value of around $472 million, with one contract worth more than $100 million.
“CA’s large contract renewals can be very lumpy, and the bookings spike in the quarter will sap some strength from the March quarter,” Goldman Sachs says. “However the net result is double-digit bookings growth for the year, well ahead of expectations.”As part of its ongoing restructuring efforts, the vendor reported $14 million in severance costs and $15 million related to the closing of facilities. For fiscal 2007, CA is predicting that revenue will come in above its earlier guidance of $3.9 billion, with an EPS of between $0.83 and $0.86.
Despite the positive earnings for this quarter, CA could still face challenges, Goldman Sachs says.
“Risks to our view include potential declines in mainframe-related business, price pressure from renewing customers and restructuring-related disruption,” the report concludes.
China Martens from IDG News Service contributed to this story.
