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UPDATED: Kumar Leaves Computer Associates

CA says Kumar's departure is part of the company's effort to finally bury the controversy over past accounting methods that have prompted federal investigations.
Pressure to resolve two federal investigations has led to the resignation of Computer Associates chief software architect Sanjay Kumar, the company disclosed Friday. Only five weeks ago Kumar stepped down as chairman and president of the systems-software company, as part of a broader management shake-up and following the indictment of former executives.

CA said Friday morning that Kumar would cease all involvement with the company immediately. CA chairman Lewis Ranieri released a statement saying, "The board is committed to reaching a settlement of the government's investigation into the company's past accounting practices as quickly as possible. We are working hard to take the remedial steps necessary to put this entire matter behind CA. Sanjay's decision to leave CA was made in that spirit."

Sanjay Kumar, Computer Associates' former chairman, chief executive and chief software architect

Sanjay Kumar, Computer Associates' former chairman, chief executive and chief software architect
Only last month, at the company's annual user conference, CAWorld, both Kumar and CA management seemed committed to his new role as chief software architect, saying it would allow him to spend more time directly with customers and making strategic product decisions, two areas viewed as strengths for him.

However, it seems Kumar's presence at the company was problematic. Kumar issued a statement saying, "It has become increasingly clear to me in the past few days that my continued role at CA is not helping the company's efforts to move forward. I understood that my stepping down as chairman and CEO represented a break with the past, but I have reluctantly concluded that as long as I hold any position, focus on past issues and my current role will continue."

"It's certainly a dramatic change from the company's position of two weeks ago," says Tim Grieser, an analyst with IDC. "Although we're sad to see Sanjay go, I think his vision for the company and his moving the company forward was a very positive step. This is a signal that the new CA management is very serious about putting the past behind and moving forward."

CA execs are trying to reach a settlement with the Securities and Exchange Commission and the Justice Department concerning their investigations into the company's accounting practices in 2000 and 2001. An internal investigation has led to the departure of about dozen former execs and a restatement of its financial statements for those two years.

In its most recent earnings report, May 25, the company said it had offered the government $10 million to settle the ongoing investigation but had no indication of what penalties or other sanctions might be forthcoming.

CA execs declined to discuss Kumar's departure beyond issuing a prepared statement, leaving analysts and customers to speculate on whether the government forced the company's hand.

"It's a loss for CA," says James Barry, CIO of OneUnited Bank, a CA customer. "The company is only as strong as its leadership." Barry says Kumar, in his role of chairman and president, "instilled a new culture there, and the next several months will be a test of how well that will survive."

Gregg Moskowitz, an analyst with Susquehanna International Group, says the specific reasons behind Kumar's departure "are difficult to read, but when you look at CA clearing the decks, you can see it's one step closer to resolution. While this company has remained focused, it would be inaccurate to say this has not been a distraction."

For Maurice Ficklin, director of technical services for the University of Arkansas at Pine Bluff and a CA customer, the distraction was minimal.

"You do what you have to do," Ficklin says. "But I was very impressed with him and liked what he was doing for the company from a technology standpoint. He added that he won't abandon CA because of Kumar's departure.

Results from an April InformationWeek Research survey conducted shortly after the management changes showed that 80% of CA customers and other software buyers were extremely or somewhat satisfied with CA's products and services. The future appeared less promising, though. More than 70% of those surveyed expressed at least some doubt about contract renewals and future CA purchases.

Richard Ptak, an analyst with Ptak Noel Associates, wonders if federal investigators may have Kumar in their sights. "I suspect he'll be indicted," Ptak says. "At CAWorld he was happy and content in his new role. CA must have been told that he's going to be indicted. It's not good news for Sanjay from a legal standpoint."

Both Ptak and Moskowitz agree that it's imperative that CA quickly names a permanent CEO and CFO to crystallize the new management. Former board member Kenneth Cron is serving as interim CEO. Cron is a former president of CMP Media, parent of InformationWeek. At the same time--and after less than a month after being hired as CFO--Jeff Clarke was promoted to chief operating officer. CA's board also appointed Greg Corgan as VP of worldwide sales, succeeding Stephen Richards, who resigned.

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