Kumar Defends CA's Financial Health After Moody's Warning

Computer Associates International

"From fiscal year 1998 we have topped $1 billion in cash flow every single fiscal year, and with respect to debt repayment, we have been extremely consistent in repaying our debt. So I can't fathom what concerns one would have with respect to our debt repayment [or our cash position, given what the facts are today," said Sanjay Kumar, president and CEO of Islandia, N.Y.-based CA, during a presentation at the Goldman Sachs Technology Investment Symposium here.

Moody's said in a statement it is reviewing CA's debt rating because of its "expectation that CA's cash flow generation will remain weakened from historic levels for at least the near term and that competitive rivalry across the company's rapidly evolving software markets remains formidable amid a weak corporate buying environment for enterprise software."

Kumar noted that CA paid down $900 million in debt in fiscal 2001 and has paid down $850 million in debt with two months to go in fiscal 2002.

He also took exception to Moody's characterization of CA's product line as a diversified software portfolio.

"I was aghast at their comment that our portfolio is increasingly diversified. If you followed the company over the last two years you would note that our portfolio has refocused down to fewer things and we are not increasing our diversification," Kumar said. "It tells us we have to do more of a job helping them better understand our business."

In November, CA revamped its branding strategy to focus on six product categories: enterprise management, security, storage, application life-cycle management, data management and application development, and portal and business intelligence.

Stirling Systems Group, a CA integration partner in Boulder, Colo., expects its sales of CA products to increase 200 percent to 300 percent this quarter, compared with the previous quarter when sales were hampered by the declining economy, said Dale Aychman, business development manager.

Aychman attributes the anticipated growth to a combination of CA's improved branding and advertising efforts and the loosening of corporate IT buyers' purse strings.

"Some of the shacklers on IT budgets are starting to come off a little," Aychman said.

Shares of CA closed down $4.25, or more than 13 percent, at $27.12 Wednesday.