News

CA names new CEO, restates revenue

• By Michael W. Bucken
• April 28, 2004

The fallout over several years of accounting misdeeds at Computer Associates (CA) International Inc. continued this week as the Islandia, N.Y.-based software maker restated more than $2 billion booked in 2000 and 2001 revenue and further shuffled its management team.

The moves follow by less than a week the resignation of longtime CA executive Sanjay Kumar as chairman and chief executive. This week, the company named Kenneth Cron, former chairman and CEO of Vivendi Universal Games, as interim CEO; in addition the firm said Stephen Richards has resigned as senior vice president for worldwide sales, the latest in a series of executive departures over the past several months.

CA restated its 2000 and 2001 revenues to fix revenue improperly reported due to its admitted practice of extending fiscal quarters beyond boundaries in an effort to meet Wall Street expectations. Gary Barnett, an analyst at U.K.-based analyst firm Ovum, noted that the overall impact of the restatements is minimal and downplayed the extent of CA's problems.

"This is hardly the shocking Enron-style story that some of CA's detractors have sought to make it appear," Barnett told eADT in an e-mail. "While CA has confessed to misallocating a little over $2 billion in revenue over the two fiscal years, the net effect is hardly a bombshell. This is not embezzlement. Nor is it theft. And while it is certainly wrong to mislead investors in this way, this simply is not the crime of the decade. We're bound to ask if the SEC is going to conduct a forensic investigation of other Nasdaq-quoted companies. We'd be surprised indeed if the 35-day month proved to be unique to CA in 2000 and 2001."

Barnett noted that new CEO Kenneth Cron has created several new executive posts to ensure compliance with accounting regulations. He contends that those moves, combined with the restated revenues, "ought to reassure regulators that CA is now keen to put its past misdeeds behind it -- and that it recognizes the need to do so in a very public and transparent manner."

CA has also promoted Jeff Clarke, who joined the firm as chief financial officer earlier this year, to the vacant COO post. Clarke was previously CFO at Compaq Computer Corp. and stayed on board there for several months after its acquisition by Hewlett-Packard Co. In addition, Greg Corgan was named senior vice president for worldwide sales, replacing Richards.