RealTime IT News

CA Profit Doesn't Spare Jobs

Computer Associates more than doubled its profit for the first quarter of this year but continued to chip away at its staff in the hopes of saving $75 million for the year.

CA's latest restructuring move highlights CEO John Swainson's pledge to get the company back on its feet and stronger than ever.

The staff reduction of 800 employees represents 5 percent of the Islandia, N.Y., company's workforce. The move matches one the company made in September when it laid off 800 workers, yielding an annual savings of $70 million.

CA would later split its software offerings into separate units for more effective operation.

Swainson promised that the company's sweeping changes, which include job cuts, executive turnover and acquisitions, are not finished.

"There have been, and will continue to be, a number of significant but necessary transitions at CA," Swainson vowed in a statement. "And while the first quarter met our revenue and earnings goals, we need to do additional work to ensure that the changes yield the results intended and help effectively position CA for the long term."

SG Cowen equities analysts said in a research note that although the transition at CA is still in process, new products, distribution, acquisitions and a new sales incentive system should help drive a rebound in billings and cash-flow growth this year.

"The pieces are in place; it's now up to the new management team to execute," SG Cowen said in the note.

CA also announced that its profit grew to $94 million on 15 cents per share for its first quarter 2006 earnings, an improvement from the year-ago period during which it made $40 million on 7 cents a share.

Sales grew 8 percent to $920 million from the first quarter of this year, which is in line with analyst expectations. The company also posted earnings per share of 22 cents for the first quarter. However, new orders dipped 30 percent over the prior year period to $415 million, due to the new sales-force compensation model, which the company said was intended to drive billings growth.

Company officials said in a statement that security software was a big revenue driver.

CA has been particularly acquisitive, with moves to buy IT management and governance software maker Niku and anti-spam software maker Qurb.

The company also closed its acquisitions of network management firm Concord Communications and firewall software maker Tiny Software.

For the second quarter of 2006, CA expects an income of 5 cents to 6 cents per share and operating earnings of 23 cents and 24 cents per share. Revenue projections range between $930 million and $960 million.

CA is trying to improve its difficult position after being rocked by accounting scandals under previous management.

In April, CA restated its financial results from 2000 and 2001 to reflect $2.2 billion in revenue that was improperly booked. The Securities and Exchange Commission said the company counted $1.5 billion in revenue from more than 100 contracts that had yet to be signed.

CA is still feeling the effects of those past transgressions in its financial results, and has had to restate earnings from that dark period twice within a year.