CA Misses Second Quarter Guidance

Second quarter results issued Tuesday by Computer Associates International showed a company still in the grips of sales culture and accounting changes.

The Islandia, N.Y., technology vendor Tuesday posted earnings of $41 million during the quarter, or 7 cents a share, on revenue of $942 million.

CA fell short of analysts' second-quarter revenue guidance by about $20 million, said CEO John Swainson. But the second quarter revenue figure was 9 percent higher than it was for the same quarter a year ago, when revenue came in at $865 million based on restated earnings for that quarter. Swainson said he was pleased with the performance of the quarter.

Mainframe product sales continued to be strong, but sales of CA's newer products that address storage, security and IT management were not as good as expected, said COO Jeff Clarke. CA's sales force is still making adjustments to a new compensation model that puts the emphasis on selling new CA products over legacy products, he said.

CA's storage products billings were down 3 percent for the quarter, Clarke said.

Addressing the slowdown in storage billings, Swainson said CA's acquisition last week of messaging archiving vendor iLumin Software Services would jumpstart the business. "Storage for us has not done as well as the overall industry," Swainson said. "A lot of it has been our channel business, but we are optimistic in out ability to get that business going again. That why we bought iLumin."

CA last week restated several years of financial results. The restatements were made to adjust for revenue that was incorrectly recorded when certain contracts were not properly transitioned during CA's switch in 2001 to a subscription licensing model. The adjustments increased 2003 revenue by $15 million, 2004 revenue by $21 million, and 2005 revenue by $30 million. But the changes will reduce revenue during fiscal years 2006 through 2011 by about $80 million.