UPDATE: CA 3Q Net Up 32%, Unveils Capital Allocation Program

CA Inc. (CA) reported better-than-expected fiscal third-quarter earnings and said it plans to return up to $2.5 billion to shareholders in little more than two years.

The maker of software for mainframe and other corporate computers is benefiting from a sharpened focus on helping customers manage upgrades in information technology. It's betting it can continue its growth path through acquisitions and internal development while devoting more of its cash to investors.

CA raised its annual dividend to $1 from 20 cents. The company said it plans to buy back up to $1.5 billion shares by the end of March 2014, completing a third of the repurchases in the current quarter.

The company also raised its guidance for the current year, now forecasting earnings growth of 11% to 13%, excluding currency impacts, up from its earlier prediction of 7% to 10%. CA also said it sees revenue coming in at the high end of its 5% to 6% growth forecast.

"While we had a good quarter on many measures and continued to make progress on our long-term goals, we know we are not done," Chief Executive Bill McCracken said on a conference call with analysts.

Shares jumped 16% to $26.55 in recent after-hours trading, the highest level since May 2008.

CA has positioned itself to help companies adapt to emerging technologies such as cloud computing and server virtualization, which promise more efficient use of technology resources but also carry cost and security risks.

The company has bolstered its offerings through a recent streak of acquisitions, including its June deal to buy privately held software maker Interactive TKO Inc. for $330 million. McCracken said on the call that the company plans to continue to spend about $300 million to $500 million annually on acquisitions in coming years.

But CA also has faced criticism it relies on acquisitions funded by its traditional mainframe computing business to make up for a choppy innovation record. It remains to be seen whether CA can absorb acquired businesses and execute on its own development well enough to achieve long-term growth targets.

"This move was sooner and bigger than I would've thought, in terms of redeploying capital," Evercore Partners analyst Kirk Materne said. "It's a smart move, but at the end of the day they still have to demonstrate that a lot of their strategic plans can move them into the cloud world."

CA's latest-quarter earnings rose 32% on revenue growth in each of its three segments.

For the quarter ended Dec. 31, CA posted a profit of $263 million, or 54 cents a share, up from $200 million, or 39 cents a share, a year earlier. Excluding amortization expense, stock-based compensation and other items, per-share earnings rose to 65 cents from 50 cents. Revenue increased 10% to $1.26 billion.

Analysts surveyed by Thomson Reuters expected a per-share profit of 54 cents on revenue of $1.21 billion.

Operating margin widened to 33% from 29%.

Bookings rose 1%, or 2% on a constant currency basis.

Subscription and maintenance revenue--the largest contributor to the top line--rose 3.3%, while professional services revenue increased 17% and software fees and other revenue jumped 88%.

-By Matt Jarzemsky and Nathalie Tadena, Dow Jones Newswires; 212-416-2240; matthew.jarzemsky@dowjones.com

--Nathalie Tadena contributed to this report.

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