Computer Associates To Cut 5% of Workforce

Computer Associates said it would cut 800 employees from its payroll in order to save $70 million per year.

The move is part of the Islandia, N.Y.-based management software maker’s plan to streamline operations. CA officials said on a conference call they anticipate the restructuring will cost approximately $40 million, or four cents per diluted common share, related to severance and associated
benefits.

CA said the layoffs, about 5 percent of the company’s workforce, will
affect most of the departments in the company, and should be completed by
the end of October.

The announcement comes as CA tries to move out of the shadow of an accounting scandal that has plagued the company in the last few years and led to a purging of leadership.

Former CEO Sanjay Kumar, who took a
lesser role a CA in April to avoid being a distraction to the company
and later left CA
entirely, was indicted
last week in connection with his alleged role in CA’s accounting scandal.

Kumar was charged with securities fraud, conspiracy, obstruction of
justice and conspiracy to obstruct justice by the U.S. Department of Justice
(DoJ), FBI and U.S. Attorney’s Office. CA has since revoked home security
and office support benefits given to Kumar as part of his severance package.

Last week, CA struck a deal with the U.S. Attorney’s Office in order to avoid a
court appearance over its accounting problems. The deal came after CA agreed to shell out $225 million to compensate shareholders for any losses resulting from the
“company’s criminal conduct” related to how it accounted for its revenues during the past few years.

In the past few months, CA officials have promised to take a more active
role in pushing the company’s products, improving the company’s marketing
message while maintaining CA’s technology vision. Recently, CA upgraded and
unified its storage management software suite.

CA Chief Executive Officer Kenneth Cron said on the call the time was right
to make changes.

“CA has great strengths in its technology, its customer base and its balance
sheet,” Cron said. “To ensure our long-term success, we need to leverage
these strengths and realign our investments with the company’s strategic
growth opportunities.”

Cron assured the public that the cuts will not affect the company’s ability
to offer the $225 million settlement to shareholders going forward.

The majority of the charge for the layoffs, about $25 million, is expected to be taken in the second quarter of fiscal 2005, with the remaining amount to be incurred by the end of the fiscal year, the company said.