Will Customers Flee CA?

Apr 23, 2004

Jim Wagner

After employees from the company's finance and legal divisions were fired Monday, on Wednesday Chairman and CEO Sanjay Kumar was forced to resign from the board of directors and CEO slots he's enjoyed for four years. Kumar was relegated to a lesser role in the organization as chief software architect.

At the heart of the purge is an ongoing Securities & Exchange Commission (SEC) probe over how the Islandia, N.Y.-based company's recognized customer contracts in financial reports. Federal regulators say the practice inflated the company's true revenue picture.

The ousters are among a number of moves by CA to put its problems behind it, such as issuing $144 million worth of stock last fall in order to settle class-action shareholder lawsuits that hit the company over accusations of accounting improprieties stretching back to 2000.

Investors had charged that CA renewed contracts before their terms ended in exchange for larger payments up front, which led investors to believe that CA had closed more deals and incurred higher revenue than it really had.

But as CA takes steps to put the accounting scandal behind it with the recent management shake-up, competitors waiting for CA customers to come running to them may have to continue waiting, some enterprise software analysts said; then again, new customers probably won't be an easy sell for the time being either.

"People will probably take a position of, 'Oh, if I have to deal with CA, I'll wait until the dust settles,' and it will certainly be difficult for CA in any deal that they are engaged in and amplify any problems they already have," Jean-Pierre Garbani, a vice president and research director at Forrester Research, told

"Many people, especially on the technical side, don't pay attention [to the news] but suddenly there's so much noise around it, it's going to stop and make them rethink [their deal]."

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