CA CEO to Shareholders: ’07 to Be Execution Year

Troubled systems management and security software vendor CA aims to get back on track in its current fiscal year after a series of unforeseen setbacks last year, its chief executive officer pledged to shareholders.

“2006 was clearly a year of transformation,” John Swainson told shareholders at the company’s annual meeting in New York Monday, which was also webcast. “We didn’t fully deliver on our expectations for 2006. Execution is the theme for CA in 2007.”

CA had to delay final filing fourth-quarter and full fiscal 2006 financial results twice due to internal stock options investigations and the impact of a new sales-commission plan.

“It didn’t reflect well on us a company,” Swainson said. “Hopefully, it’s all behind us.”

Focusing on the convergence of systems and storage management and on security management software as outlined in the company’s Enterprise IT Management (EITM) strategy, Swainson hopes to grow CA from a US$4 billion company to $6 billion by 2009, he said. The watchwords for CA going forward are “unification and simplification,” he added.

CA spent more than $1 billion on nine acquisitions during fiscal 2006, a practice Swainson doesn’t see CA repeating in the near future. Instead, the vendor will make “much smaller” purchases in fiscal 2007 and work on integrating into its existing software the technologies it has already acquired, he said.

CA continues to be a company haunted by its past. One unidentified shareholder asked why in all of CA’s recent ups and downs, the vendor hasn’t mentioned Charles Wang, the company’s charismatic cofounder and former chairman and CEO, and his remuneration from the firm.

“Mr. Wang doesn’t have an operational role at company,” Swainson said. “I’ve never met with him in my nearly two-year tenure” at CA. Wang is a stockholder, but Swainson said he’s unaware of any other involvement the former company head has with CA.

Wang’s successor at CA, Sanjay Kumar, resigned from the company in 2004 following questions about his role in an accounting fraud in which the vendor recorded revenue before contracts were finalized to beef up quarterly financial results.

Kumar was indicted and pleaded guilty to financial fraud charges in April, along with codefendant Stephen Richards, previously head of worldwide sales at CA. The two men are due to be sentenced in October.

CA reached a deferred prosecution agreement with the U.S. government in September 2004, requiring the company to pay $225 million to a restitution fund to compensate victims of the fraud.

Another shareholder asked about the status of that arrangement.

Last week, CA announced an agreement with the U.S. attorney’s office for the Eastern District of New York and the U.S. Securities and Exchange Commission to extend the term of Lee Richards as an independent examiner overseeing CA’s financial reporting until May 1, 2007. Richards’ term had been due to expire last Saturday.

“The company has largely met the agreements, but material weaknesses still exist,” said CA Chairman Lewis Ranieri. “We’re working on those areas and hopefully will end Richards’ term even before May.”

CA has paid into the fund, and its distribution is being finalized, he added. Ranieri directed CA shareholders to a special website as the official source for information.

At the meeting, CA shareholders elected all 11 members of the board to one-year terms and defeated a stockholder proposal to put in place a poison pill designed to prevent a hostile takeover of the company.

-China Martens, IDG News Service (Boston Bureau)

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