Computer Associates International Inc.
Monday cleaned house in a grand scheme to reorganize its different business
Realigned Computer Associate
executive’s plan to initially
focus on delivering greater shareholder value by spinning off technology
that would thrive and flourish on an independent basis.
The first corporate sibling to form is iCan-ASP Inc., designed to service
the application service provider infrastructure marketplace.
CA contends that the ASP market segment is large enough to support its
direct attention and growing rapid enough to mandate a separate business
focus from its core software lineup.
Nancy Li, CA chief technology officer was named chief executive officer for
the fledgling business division.
iCan-ASP tentatively plans offer new and innovative technologies for
providing applications through the Internet, over wireless and broadband
CA has retained Credit Suisse First Boston and Morgan Stanley Dean Witter
to advise on taking iCan-ASP public.
Additionally, CA announced that Sanjay Kumar, current president and chief
operating officer will assume the helm as president and chief executive
officer. Charles Wang, CA founder will exit the chief executive slot but
will continue to serve as chairman.
Wang said the restructuring would better serve investors and clients alike.
“This realignment marks the logical transition from the founder phase of CA
to the next level of corporate activity, which is more focused on enhancing
shareholder value and is a broader implementation of our vision,” Wang said.
If CA maintains its commitment to being a worldwide leader in e-business
software it will also need to intensify its focus on its three
fastest-growing product areas; security and storage management, network
performance management, and application development for business
Kumar said focusing on its fastest-growing businesses is part of CA’s
evolution in a dynamic marketplace.
“The announcement reflects our emphasis on driving CA to be more efficient
and customer-focused, and to heighten awareness of CA’s core strengths and
innovations,” Kumar said.
While CA seeks to balance strong revenues from its core businesses with
increased value from new business ventures, analysts remain doubtful that
CA’s profit woes can be wiped clean by restructuring.
CA stock went tumbling when it issued a profit warning in the first quarter
due to contract delays and weak European sales.
As chief operating officer, Kumar was left holding the bag, apologizing for
CA’s sharp earnings drop and calling the soft sales of software for S390
mainframe computers an absolute screw up.
To mitigate the problem, Kumar said the company would try to cease bundling
within the same contract software for mainframe and distributed computer
systems. That way, the software firm would no longer rely on hardware
manufacturers to sell its services.
Still, analysts and investors were not convinced that CA’s declaration of
independence from hardware manufacturers would stop the stock slide and CA
shares dipped to record lows.