Computer Associates Net Loss Narrows

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Computer Associates International on Tuesday said its fiscal third-quarter net loss narrowed and its profit under its controversial new accounting method topped Wall Street's outlook.

The Islandia, N.Y.-based software maker says excluding charges and under its year-old subscription accounting method, it earned $417 million, or 71 cents a share, for the quarter ended Dec. 31, compared with pro forma earnings of $247 million, or 42 cents a share, in the year-ago quarter.

Analysts had generally expected earnings of 60 cents a share, with estimates ranging from 52 cents to 62 cents a share, according to 14 analysts polled by Thomson Financial/First Call.

Computer Associates says pro forma revenues rose, to $1.45 billion from $1.40 billion a year ago. The sales and services not included in the quarter are recorded as residual revenue to be recorded as revenue at a later date.

Total deferred revenue recorded in the quarter increased, to $554 million from $466 million.

Pro forma results reflect the company's performance as if all the company's contracts--some signed several years ago--had been operating under a new accounting system. The subscription accounting method spreads out the value of contracts over their lifetime. This includes results for Platinum and Sterling, which were bought about two years ago, as if they too had been part of CA and operating under a ratable revenue recognition model.

Under generally accepted accounting principles, the world's No. 4 software maker posted a net loss of $231 million, or 40 cents a share, compared with net a loss of $342 million, or 59 cents a share, in the year-ago quarter.

Revenues rose to $749 million from $783 million last year.

Last summer, Computer Associates fought off a lengthy proxy battle initiated by Texas billionaire Sam Wyly, who was one of the critics of the company's new accounting methods. Wyly accused Computer Associates of using tricky accounting to cover up declining fiscal financial results.

In October, after the company reported fiscal second-quarter earnings, it raised its guidance for the third quarter and said it expected to earn 61 cents a share, instead of the 50 cents a share analysts had expected, according to First Call.

Shares of Computer Associates on Tuesday closed down $1.08, or 3 percent, to $34.90 before the release of the results. Since plummeting after the attacks on the World Trade Center, shares of Computer Associates are up 54 percent and have outperformed the S&P 500 index by 33 percent.

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