--Company cites weaker new product sales
--Full year revenue, earnings views cut
--CEO says company is working on succession plan
(Updates with executive commentary, background on bookings, CEO
succession plans.)
By Drew FitzGerald
CA Inc.'s (CA) fiscal first-quarter earnings edged down 0.4%
after the business-computing company sold less new software than
expected, prompting CA to scale back revenue goals for the rest of
its fiscal year.
Shares fell 8.8% to $24.31 after hours as the company reported a
surprise revenue drop and refreshed its guidance. The stock, which
surged in January after the company unveiled a series of
shareholder-friendly initiatives, was up 30% this year through
Thursday's close.
CA makes software for computer systems and mainframes, a
business that had yielded modest revenue growth for more than a
year until the latest quarter. Mainframe maintenance yields
particularly strong margins because there are fewer companies
qualified to operate and upgrade often outdated systems.
Fewer mainframe and enterprise segment customers renewed
contracts in the fiscal first quarter, however, pushing overall
bookings down 36%. The company had previously warned in May its
renewal portfolio would decline at a single-digit rate this fiscal
year, calling the latest quarter a low point.
"We did not deliver at the level we expected," Chief Executive
Bill McCracken said, adding the company didn't "adequately plan"
for the disruption a recently launched organizational overhaul
would have on its sales force.
For the 2013 fiscal year, CA trimmed 3 cents off the top of its
per-share earnings view, projecting an adjusted profit between
$2.45 and $2.50 a share. The company now projects about $4.74
billion to $4.8 billion of revenue, down from a May view of $4.85
billion to $4.95 billion that was considered cautious at the
time.
For the quarter ended June 30, CA posted a profit of $240
million, down from $241 million, a year earlier. On a per-share
basis, earnings rose to 63 cents from 47 cents, as the latest
period had 6.8% fewer shares.
Excluding amortization expense, stock-based compensation and
other items, earnings from continuing operations rose to 63 cents a
share from 55 cents. Revenue slipped 1.5% to $1.15 billion, but
rose 1% in constant currency.
Analysts polled by Thomson Reuters had projected a per-share
profit of 61 cents on revenue of $1.18 billion.
Subscription and maintenance revenue, which accounts for the
bulk of the top line, decreased 3%. The much smaller professional
services revenue stream improved 1.1%, while software fees and
other revenue rose 17%.
CA said it will continue to grow through acquisitions and
internal development while devoting more of its cash to investors.
CA in January raised its annual dividend fivefold to $1 and boosted
its buyback program to $1.5 billion.
Mr. McCracken said little to calm speculation about his
successor, saying simply the company is working on a succession
plan and will focus on ensuring a smooth transition, "whenever it
occurs."
The Wall Street Journal in June reported the company was
launching a search for a successor to Mr. McCracken, who turns 70
in November.
(Nathalie Tadena contributed to this story.)
-Write to Drew FitzGerald at andrew.fitzgerald@dowjones.com
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