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November 14, 2005

CA CEO charts company changes and EI vision

One year into the job as CEO of Computer Associates International Inc, John Swainson used the annual CA World customer forum and a series of open letters to draw a line under the company's past indiscretions, and to introduce plans for a fresh start in the systems management software market.

By CBR Staff Writer

Swainson reaffirmed some of the fundamental reforms that have been made by the company since it settled with the US Department of Justice in September 2004. That has since led to new top management, new business and financial control systems, and a realignment of the company’s operations into four distinct business units.

CA has been refocused. We have been turning the company inside-out over the past year. We are now in the middle of a transformation, and have a four-point action plan for growth, he said.

A reinvigorated $690m program of internal product developments, plans for international expansion, a revitalized search for more and stronger partnerships, and further strategic acquisitions all make for a strategy for sustained growth, Swainson suggested.

I want to restore belief in the company, he said, we will concentrate our business efforts on the fastest growing segments of the market and on those markets in which we can lead. We want to be the category leader in the four business unit market segments, and be seen as mindshare leader and as an innovator.

The vendor has already shown that it is prepared to make acquisitions if necessary, to enhance its position in its chosen core segments of security management, enterprise systems management, storage management, and business service optimization.

In the last 18 months it has spent well over $1bn on company takeovers, buying Netegrity and Pest Patrol, Concord Communications, Illumin, and Niku. The company believes there is a collective market potential in these segments of around $35bn.

We aim to be the number-one or number-two in each space, said Jeff Clarke, CA’s COO. If we can achieve a relatively high market share, we expect to see relatively high profits.

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Latest numbers for the second quarter 06 show that CA’s margins are in excess of 40% on a pre-tax basis, which is up 40% year on year. Clarke said the company’s billing of license revenues, which it normally defers over three years, is showing 14% growth. Cash flow is up 19% year-on-year, he said. We have cash flows of $1.48bn, which is the best in the company’s 30-year history.

But CA finds it hard to be heard above all the noise that circulates on Wall Street, and its stock is routinely cold-shouldered by any but the most patient of investors. Skeptics say CA has become too reliant on buying its growth through product acquisitions and company takeovers. It has acquired 50 businesses and over 1,000 products to date.

It aims to address that perception with a series of steps to revamp the sales efforts of its 2,500 reps worldwide and to realign their focus on making sales into these core areas around a new proposition of an Enterprise IT Management suite.

CA says it will be working to a new EI mantra that its systems can help simplify and unify the management of IT. EI addresses the needs of IT shops that are tasked at the high level with managing risk, improving service levels to the business, managing infrastructure costs, and aligning IT investments with existing and emerging business demand.

Just like ERP, CRM, or office productivity systems, EI is an integrated suite of point solutions, Clarke said. The system is strung together through a common data model and uses a common user interface and an underlying layer of management and security services to deliver a consistent definition.

The company will, he said, substantiate its new program with the launch of 26 new and revamped products, the largest in the company’s history.

This includes release 11 of the Unicenter enterprise systems management suite, a new version 8 of the eTrust security portfolio and a revamped 11.5 BrightStor storage management release.

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