CA Reports Uptick In Big Contracts In Q3

Conventional wisdom is that businesses are postponing major IT purchases because of the recession. But CA is bucking that trend, reporting that it signed 18 software license deals worth more than $10 million each, with a total value of $471 million, during the third quarter. That's up from 16 such contracts with a total value of $303 million in the same period one year ago.

CEO John Swainson, nevertheless, acknowledged the difficult challenge of selling in the current economic climate. "There's no doubt it's tough out there. We are seeing customers take longer to make [purchase] decisions," he said.

Swainson's comments came in a conference call with financial analysts in which the giant software developer reported generally solid results for the quarter ended Dec. 31. While sales declined 5 percent from the same period last year to $1.04 billion, most of that was due to currency fluctuations that cut revenue from international operations by 13 percent. Sales in North America were up 1 percent in the quarter. Overall sales were flat in constant currency.

For the nine months ended Dec. 31, CA has recorded sales of $3.24 billion, up from $3.19 billion in the first nine months of fiscal 2008. For all of fiscal 2009, which ends March 31, CA is forecasting that sales will increase between 1 and 2 percent in constant currency to between $4.23 and $4.31 billion.

Customers are focusing spending on IT that provides a rapid return on investment, "Often less than a year -- that's become a crucial selling point," the CEO said.

Sales were strong across both CA's mainframe and distributed computing product lines, and sales bookings in the quarter, when accounting for currency fluctuations, were up 3 percent. Swainson said the CA Wily application performance management software continues to be the vendor's strongest-selling product.

CA has boosted its profitability by leveraging its channel partners to provide customers with specialized or customized services, said a report from analyst Melissa Grady at Technology Business Research. "TBR believes the model allows CA to focus its technical resources on implementing product, while partners have an opportunity to get involved in customer accounts and drive additional sales," the report said.

Despite the revenue decrease, CA reported a 30 percent hike in profitability in the quarter as net income rose to $213 million. That was largely due to the vendor's cost-control efforts: Total expenses before interest and taxes were down 14 percent for the quarter.

While many companies have been slashing expenses in response to the deteriorating economy, including laying off hundreds and even thousands of workers, CFO Nancy Cooper attributed CA's strong bottom line to an expense-control program the company began three years ago.

"CA is ahead of the curve after three years of restructuring and cost-reduction efforts and is therefore well positioned to maintain profitability through the global recession," said Grady's TBR report. The report noted that CA has reduced its workforce to about 13,500 from a peak of 16,000 three years ago.

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