Boosted by revenue from its October purchase of security software maker Netegrity, Computer Associates reported gains in its revenue and net income for the quarter ended Dec. 31.
Boosted by revenue from its October purchase of security software maker Netegrity, Computer Associates reported gains in its revenue and net income for the quarter ended Dec. 31.
CA’s revenue for the quarter, the third of its fiscal year, was $911 million, up 9% from its total in the same quarter last year. Net income was $36 million, double the $18 million CA earned in 2003’s third quarter.
Excluding a series of special charges, including costs related to acquisitions and shareholder litigation settlements, CA’s net income from continuing operations was $124 million, or 19 cents per share, in line with the consensus estimate of analysts polled by Thomson First Call.
CA’s revenue from subscription software sales rose to $623 million, up from $506 million in the year-earlier period. The increase offset declining maintenance fees — down $19 million, to $126 million.
After several years without acquisitions, CA has bought two companies recently: Netegrity and anti-spyware software developer PestPatrol. CA paid $39 million for PestPatrol, CA COO Jeff Clarke said in a conference call with analysts following CA’s third-quarter results release. CA had previously declined to say how much it had paid for PestPatrol. The PestPatrol technology is on track to deliver $30 million in revenue and $10 million in profit annually for CA, Clarke said, citing PestPatrol as an example of the kind of buying opportunity CA will seek out — companies offering in-demand technologies that will quickly add to CA’s revenue growth.
CA CEO-to-be John Swainson backed that view, telling analysts “we will continue to look for attractive opportunities to round out our portfolio.” Swainson will take over as CEO later this year from interim CEO Ken Cron, who has led the company since former CEO Sanjay Kumar stepped down last year under fire over accounting violations that occurred under his watch.
Cron said CA is continuing to work toward fulfilling the terms of the deferred prosecution agreement it reached in September with the U.S. Department of Justice and the U.S. Securities and Exchange Commission to avoid criminal penalties against the company for an accounting scheme that resulted in improper booking of $2.2 billion in revenue during CA’s 2000 and 2001 fiscal years. CA will soon name an independent examiner, a move that will allow the company to begin an 18-month probationary period, Cron said. If CA is found to be in compliance with its agreement at the end of that period, the government will move to dismiss the charges.
CA also expects to soon name a CFO. Clarke, who originally joined CA in April as its CFO before being promoted to COO, has held the CFO job on an interim basis while CA sought a replacement.
Enterprise management software remained the cornerstone of CA’s portfolio, generating 42% of its product revenue during the quarter. However, security software is CA’s fastest growing business, surpassing storage as its second largest revenue generator in the year to date and bringing in $161 million during the quarter, up from $83 million in last year’s third quarter.
Russell Artzt, a longtime CA executive who has run its eTrust security business for several years, was promoted last week to CA’s head of product development, and Swainson told analysts during the conference call that he sees Artzt’s success with the eTrust business unit as a model he’d like other CA businesses to emulate. Swainson is in the process of reorganizing CA from a brand-based internal structure to a business-unit focused one that will give each group head direct control of marketing and development resources. Swainson told analysts that cost savings isn’t a factor in the reorganization; instead, he’s hoping to increase efficiency and drive growth.
