CA Treads Expansion Path

Technology major CA Technologies (CA) is undertaking strategic initiatives to give a new dimension to its business. Bull and CA recently formed a joint venture to take their cloud computing business to the next level. The company has formed a strategic alliance to help large enterprises transform their heterogeneous IT infrastructures to private clouds.

The alliance is specifically aimed at providing synergies with respect to several technologies, including a distribution agreement covering CA Technologies’ Virtualization Management and Service Automation solution portfolio: CA Automation Suite for Data Centers. This is an integrated solution for automated data center management, which supports a variety of computing environments, including Windows, Linux, AIX and other types of UNIX.

We believe this new collaboration will allow both the companies to help customers drive efficiencies in their IT infrastructures, streamline architecture silos and automate the IT management process.

This apart, the company recently launched the CA Service and Portfolio Management Partner Solution, an online Portfolio management solution, which offers partner-centric content, such as solution briefs and demonstrations, thus helping partners effectively deliver business services and solutions for their customers. These solutions are rolled out specifically keeping in mind the customer requirements and to grab a major share in the portfolio management market.

Moreover, we also believe that the ITKO acquisition would be beneficial for the company, as it is likely to expand its presence in the Mainframe market. Moreover, CA is currently focusing on cloud computing, as prospects in this segment are bright. However, the stiff competition that CA faces is also concerning. There are many big and established players in this space, which will no doubt temper growth going forward.

CA Inc. is one of the leading players in the information technology (IT) management software space. CA posted modest first quarter results, delivering encouraging growth in both the top and bottom line. Increasing product demand and strong revenue backlog were the other positives in the quarter.

On the other hand, we are a bit concerned about the intense competition in the software & cloud computing space from big players, such as International Business Machines (IBM) and Hewlett-Packard Company (HPQ). This apart, its high debt balance and European exposure may pose some challenges going forward.

CA currently holds a Zacks #3 Rank, which implies a short-term Hold rating.

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