Computer Associates Sees Lower Losses But Dim Outlook

On the positive side, CA reported a quarterly loss of $65 million compared to the prior year's first quarter loss of $342 million. Net loss per share for the first quarter narrowed, from 59 cents to 11 cents. In addition, the company increased total first-quarter revenue 7 percent, to $765 million compared to revenue of $712 million in the prior year's first quarter. Wall Street analysts had predicted revenue of $760 million to $775 million for the quarter.

During the announcement, CA president and CEO Sanjay Kumar said the company's new subscription license model has given customers more flexibility to buy CA software and has helped provide the company with a predictable revenue stream as well. Kumar also stated that CA achieved an operating profit of 2 cents per share, slightly ahead of the company's expectations for the quarter, which was 1 cent to break even.

"We are encouraged to be able to report these results in this environment," Kumar said. "The benefits of our subscription model are becoming more evident."

On the negative side, however, CA was forced to lower its outlook for fiscal 2003 from between $3.20 billion to $3.26 billion to $3.10 billion to $3.20 billion, saying that "it appears that an economic recovery will take longer than originally anticipated." Diluted operating earnings per share are expected to remain in the originally planned range of 10 cents to 13 cents. For the second quarter, CA expects little to no growth, predicting revenue to be in the range of $760 million to $775 million and diluted operating earnings per share in the range of 1 cent to 2 cents.

There were more mixed signals as well for the company. CA reported a product revenue increase of 11 percent, from $629 million to $700 million for the first quarter, but professional services revenue decreased 22 percent, from $83 million to $65 million.

CA is also still under investigation by the U.S. Securities and Exchange Commission and the U.S. Attorney's Office regarding CA's accounting practices dating as far back as 1995. Kumar said the company continues to cooperate with the investigations and denies any wrongdoing.

Recently, CA has revamped some of its financial reporting practices to provide more transparency for investors, according to company officials. The company added such information to its quarterly reports as ratable recognition of software license fees implemented and disclosure of total contract value recorded in the quarter. In April, CA adopted Statement of Financial Accounting Standards No. 142, which eliminated the amortization of goodwill and certain other intangible assets beginning in the current quarter.