CA's Kumar Sees No Near-Term Market Recovery

Computer Associates International doesn't expect a recovery in IT spending until the second half of 2003, said the company's top executive during a briefing with financial analysts here.

"We're all hinging our hopes on the latter half of 2003 simply because it's not going to be the early half of 2003, and we don't know any better, so the latter half sounds good," said Sanjay Kumar, CA's chairman, president and CEO.

Current conditions are no better or worse than they were the same time last year, he said.

Kumar expressed doubt that spending would return to levels seen during the dot.com boom. "I don't believe customers will come back to the glory days of buying. I think they're going to buy in a more definite, deliberate way in the future," he said.

Kumar also refuted a report Thursday in The New York Times that a federal investigation into CA's accounting practices, being conducted jointly by the Securities and Exchange Commission and the U.S. Attorney's Office, has escalated.

"I would personally disagree with that characterization given what I know today, given what the company knows, and given what the company's counsel knows about that," Kumar said. "We have not been informed of any escalation with respect to the inquiry. Neither have our outside counsel been informed of any escalation with respect to the inquiry."

The newspaper reported that the federal criminal investigation into CA's accounting "has intensified this fall, with prosecutors in Brooklyn issuing grand jury subpoenas for testimony and documents from former employees and the company's customers."

CA revealed in May that the SEC had subpoenaed third parties in the investigation.

"We have been on the record a number of quarters back saying that we understood that third parties were actually subpoenaed for documents. We provided documents, and I'm sure the government wants to check to make sure the other half of the documents are the same," Kumar said, adding that he believes CA's historical accounting was "right and proper."

Earlier this week, CA announced the retirement of Chairman Charles Wang, who co-founded the company 26 years ago. The company's directors named Wang to the honorary, uncompensated position of chairman emeritus and elected Kumar to succeed him as chairman.

Kumar did not comment on his new position or Wang's retirement during the briefing.

For its second quarter ended Sept. 30, CA reported a loss of $52 million, or 9 cents per share, compared with a loss of $291 million, or 50 cents per share, the same quarter a year ago. Revenue for the quarter rose to $772 million, up 5 percent from $733 million the same quarter last year.

Kumar credited CA's business model of subscription-based licensing as "one of the reasons we're putting up reasonable numbers in a very difficult environment."

Shares of CA traded down 40 cents at $14.75 Thursday morning.

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