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Computer Associates CEO: Demand Remains Strong
Updated: Monday, April 16, 2001 08:26 PM ET Email this article to a friend!
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By Elena Molinari


Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--At a time when most software companies are struggling with a sharp reduction in information technology spending, Computer Associates International Inc. (CA, news, msgs) Monday surprised Wall Street with upbeat earnings forecasts.


After the closing bell Monday, Computer Associates, Islandia, N.Y., said it expects fourth-quarter operating earnings, excluding amortization and special charges, to come in at 47 cents a share on revenue of $1.44 billion. The consensus estimate of analysts surveyed by Thomson Financial/First Call was for earnings of 43 cents a share on revenue of $1.425 billion.



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Computer Associates President and Chief Executive Sanjay Kumar credited the better-than-expected quarter to the company`s new business model, under which the software maker recorded 95% of its March-quarter business.


"At a trying economic time for many of our peers, we due our rocking performance to the strong alignment with our new business model," Kumar said in a Monday conference call with analysts and reporters.


After a lackluster 2000 in which weak software sales hurt Computer Associates, the company last fall announced that it would introduce a new pricing structure for its products. At the same time, it said it would recognize income from software licenses on a monthly basis, rather than upfront as the contracts were signed. Now the transition is almost completed, Kumar said.


"This means that now every dollar of earnings is really underpinned by substantial performance in revenue," Kumar explained, "as earnings recognize only a fraction of the actual contracts, while the rest remains in residual value."


By "residual value," the executive means the total contract value the company doesn`t recognize upfront. In the March quarter, residual value grew to $1.3 billion, he said, including the $629 million of residual value recorded during the December quarter. That means that Computer Associates signed contracts for about $670 million during the last quarter.


Over the same period, Kumar also said, the company reduced its debt by $200 million.


Computer Associates` earnings predictions are even more surprising considered that only a few days ago two competitors revised their estimates downward.


On Thursday, information-storage leader EMC Corp. (EMC, news, msgs) said its first-quarter earnings will miss Wall Street estimates for the first time in more than five years. On the same day, rival Network Appliance Inc. (NTAP, news, msgs) issued a warning that its fiscal fourth-quarter results will fall below its previously announced projections. Both companies cited delays and cutbacks in information-technology spending amid a slowing economy.


Demand for Computer Associates` products, instead, is still strong, said Kumar. "Customers are buying today," he said. "They continue to buy in a cautious way. They are technology-(focused) and not big-deal focused, and we are switching our model to be technology-focused to best serve them."


Kumar declined to give details on the quarter, sidestepping analysts` requests to specify how much of Computer Associates` quarterly revenue came from its mainframe business. "All areas did well," he said, promising to be more specific when the company reports fourth-quarter results on May 22.


During the March quarter, Computer Associates` business benefitted from the introduction of a new line of mainframe computers from International Business Machines Corp. (IBM, news, msgs) that Computer Associates helps manage. Kumar declined to comment on the relationship with IBM.


-Elena Molinari; Dow Jones Newswires; 201-938-4047; [e-mail]

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Prudential reiterates coverage of CA at Strong Buy, price target $48 (Headline only) Briefing.com - 08:48 AM EDT

[mr007]

moin,
eine gute alternative stellt auch computer sciences dar, sollten die ergebnisse von ibm im rahmen bleiben werden beide aktien in den nächsten wochen gut laufen.
viel glück mr007