CA Layoffs Lead Rally Fizzle

Computer Associates   said it would lay off about 1,700 jobs after it posted a drop in profits of 64 percent for its fiscal first quarter.

The embattled software maker, which has been undergoing a massive restructuring the past few years, said revenue for the first quarter of 2007 was $956 million, an increase of 3 percent over the $927 million reported in the similar period last year. Subscription and professional services revenue drove the increase.

Net income was $35 million, (6 cents per share), a 64 percent drop compared to its profit of $97 million, or (16 cents per diluted common share) in the same, year-ago period.

Total expenses were up by 9 percent to $905 million, driven in part by personnel costs but also by acquisition-related payments.

CA said the jobs it will eliminate include 300 associated with consolidated joint ventures and global facilities.

The company said the layoffs would result in a $200 million charge to cover the costs of severance but would reduce operating expenses by $200 million annually.

Shares of CA were headed up by 2.53 to $21.77 in after-hours trading.

The earnings results and layoff news hit the market on a day in which momentum for a rally fizzled amid a cease-fire in the Israel-Hezbollah hostilities.

The Nasdaq index finished with a gain of 11.33 on the day to 2,069.04, up about a half a percent. The S&ampP Index gained 1.47 to finish at 1,268.21.

With HP  and Dell  on tap to deliver earnings this week, and investors awaiting key economic data, any momentum hanging in there for a rally lost fizzle as volume of trades fell off compared to Friday.

Stock option backdating scandals continued their drumbeat of news in the market too.

Sanmina-SCI  joined the growing list of companies taking earnings hits from past backdating practices. The circuit board maker’s shares closed down by 12 cents, about 3.7 percent to $3.11 after it announced it would delay the filing of its quarterly report after finding problems in past accounting for stock options grants.

Chipmaker PMC-Sierra  gave itself an OK on its own internal audit of how it accounted for stock options in prior years, saying the errors it found between 1998 and 2001 were not the result of misconduct. However, its quarterly report is still delayed while it works on its own restatements. Shares closed up 21 cents to $5.21.

As previously noted, investors will get plenty of data this week on both the health of the tech sector and the economy in general.

Applied Materials is due to report results Tuesday, with HP on tap for Wednesday and Dell   on Thursday. Investors were awaiting wholesale and retail inflation reports and retail earnings this week with the Labor Department releasing its producer price index data Tuesday. The consumer price index is expected on Wednesday.

HP is expected to report another stellar quarter, with earnings up 11 cents a share from the year-ago quarter to 47 cents a share, and sales up 5 percent to $21.8 billion. HP closed at $33.29 today, up 24 cents.

Dell’s recent earnings warning, that fell below analysts’ expectations, helped beat down the price to the $19 range three weeks ago, which was one of its lowest prices in over four years.

But the world’s largest computer maker has been on the steady. Today it closed at $21.24, up 17 cents. As for its results, analysts are expecting Dell to stabilize earnings in the short-term with price increases. Longer-term, the company could continue to face challenges from component price pressures and PC market weakness.

Apple   gained 29 cents to close at $63.94 today after Friday’s announcement that it would request a hearing before the Nasdaq listing qualifications panel in response to a notification that it could be delisted from the Nasdaq board.

The company had announced Friday that, due to its mishandling of past employee stock options, it will miss the deadline to file its latest quarterly results.

Microsoft gained 10 cents on the day to close at $24.53 after it said it would launch a beta of software that helps gamers become game designers with their XBox 360 consoles.

Paul Shread is on vacation this week. Technical analysis will return next week.

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