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CA Technologies Q2 Income Rises, Sales Fall

As mainframe software sales decline, CA is increasing its focus on cloud management, security and DevOps tools.

CA Technologies remains a company in transition, reporting on Wednesday improved earnings for its second fiscal quarter even as sales fell for its legacy mainframe software.

"While we still have a lot of work ahead of us to achieve our medium-term goal of low single-digit revenue growth, I believe we are clearly gaining market traction," CEO Mike Gregoire said in a conference call with financial analysts Wednesday.

The company reported revenue for its second quarter ended Sept. 30 of $1.08 billion, down 2.4 percent from the year-ago period. Net income for the quarter grew nearly 7 percent to $256 million.

[Related: CA's Arcserve Spinout: A New Channel-Focused Data Protection Vendor]

The revenue decline was primarily due to decreased subscription and maintenance revenue, most of that because of declining Mainframe Solutions revenue which dropped 2 percent to $610 million in the quarter. Services revenue fell 6 percent in the quarter to $91 million.

CA is counting on its Enterprise Solutions software for its growth going forward and is focusing its product development efforts on software for cloud management, development operations (DevOps) and security. Those products include CA APM, CA Service Virtualization and CA API Management.

"We are a software company and we have to -- and will -- have great software built by great engineers," Gregoire said.

While new sales of CA's Enterprise Solutions software were up for the second consecutive quarter, Enterprise Solutions revenue was down 2 percent for the quarter to $378 million. The company attributed the drop to a decrease in revenue that is recognized on an up-front basis in the current period.

"Our second-quarter performance demonstrates continued progress in executing against our strategy," Gregoire said on the call. "I'm pleased to see [that] within new sales, Enterprise Solutions new sales grew in the low teens year-over-year, compared with mid-single-digit, year-over-year growth last quarter."

For all of fiscal 2015 CA is forecasting total revenue in the range of $4.27 billion and $4.33 billion, which would be down 1 percent to 2 percent from fiscal 2014.

The company's shares were trading down about 1 percent in extended trading Wednesday to a market value of $12.20 billion.

PUBLISHED OCT. 22, 2014

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