Threat Of Another Proxy Fight Looms Over CA

Computer Associates International Ranger Governance

"There's always the option of another proxy solicitation," said Stephen Perkins, managing director of Ranger, the Dallas-based investment firm founded by entrepreneur Sam Wyly that last summer launched a failed bid to oust CA board members.

In a letter sent Monday to CA's independent directors, Perkins called for the board to fire Chairman Charles Wang, President and CEO Sanjay Kumar and CFO and Senior Vice President of Finance Ira Zar.

The investment firm holds approximately 3 million options for CA shares that expire in 2006 and 2007, giving Ranger opportunities to launch proxy bids over the next four or five years in efforts to exact management changes, Perkins said.

"I would say that's certainly an option we have, and we will evaluate that," he said.

Ranger wants the ouster of the management team because their performance is poor and because they have not delivered on promises made at the end of the last proxy fight, Perkins said.

"I think there needs to be some changes [at CA, but whether it calls for executive changes, I don't know," said Tom Lien, vice president of business development at ePlus Technology, a Herndon, Va.-based solution provider.

CA needs to provide better focus in its vast product line and build stronger relationships with channel partners, Lien said.

CA defended its business model, accounting practices and growth, calling the letter "misleading, self-serving and inaccurate."

"Our new business model is working well and creating sustainable competitive advantage. Our ratable accounting is GAAP compliant and considered transparent by accounting experts. We are growing and gaining new customers," CA, based here, said in a statement.

CA accused Perkins and Wyly of "trying to call CA into question as a way of pursuing a personal vendetta."

"We believe very strongly that CA is on the right track to create long-term shareholder value and we will release our formal response to Mr. Perkins in due course," the statement said.

In the letter, Perkins alleged CA has failed to deliver on promises to end controversial accounting practices, disclose additional metrics on growth, add new directors and address customer dissatisfaction.

On Wednesday, CA announced the election of two new members to its board.

Perkins also questioned the value of CA shares.

Since 1994, when Kumar was named president and COO, $100 in CA stock has become $163 vs. $718 for CA competitor IBM, Perkins wrote.

He also pointed to recent events--a preliminary inquiry launched by the U.S. Securities and Exchange Commission, the downgrade of CA's debt rating, a failed bond offering and a string of class-action lawsuits--as evidence of concern over CA from other parties.

Perkins said he expects other shareholders to follow in Ranger's footsteps.

"I expect that other stockholders will feel as we do and make similar requests of the independent directors," he said.

Shares of CA closed up 66 cents at $20.76 Wednesday.