CA Solution Providers Don't Expect Fallout From Federal Probe

"From my perspective as a solution provider, I'm not worried," said Ed Correia, director of technical services at ePlus Technology, Herndon, Va. "CA is too big. They're not going away."

A heightened awareness of corporate reporting practices has emerged in the wake of Enron's downfall, said Robert Foley, president of ConTech, Indianapolis. "Customers have become somewhat jaded about those kinds of concerns," he said.

Longer term, however, CA sales could suffer if the vendor becomes preoccupied with legal struggles, said Bradley Perry, operations manager at Automated Systems, Lincoln, Neb. "It could trickle down if CA gets distracted and can't use its resources for development and marketing," he said.

Shares of CA dropped more than 17 percent last Wednesday after published reports said federal agencies had launched a preliminary investigation of whether CA has properly recognized revenue.

CA President and CEO Sanjay Kumar said last week that the U.S. Attorney's Office and the Securities and Exchange Commission confirmed that they have some form of preliminary inquiry under way.

"We are uncertain as to the topic," Kumar said. "We're very eager to provide them with whatever information they need to dispel this cloud that's hanging over us."

The U.S. Attorney's office declined to comment.

CA's accounting practices faced scrutiny last summer during entrepreneur Sam Wyly's proxy bid to oust CA's board. Wyly accused CA of masking its financial results in revenue recognition and its subscription software licensing model.

Kumar has vigorously defended the Islandia-based company's reliance on both pro forma and GAAP (generally accepted accounting practices) earnings results.