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To: The Rancher who wrote (2858)	8/3/1998 6:07:00 PM
From: rupert1	Read Replies (1) \| Respond to of 5232

Rancher: So, apart from the admittedly serious problem of client reluctance in continuing with the arrangement, CA seems to have been positioned rather nicely compared with other software firms? One of the crucial issues in evaluating the stock, then, is to be able to quantify the loss of revenues arising from this license problem within a given time-frame and translate that as an effect on earnings. One of the institutional analysts - I think it may have been Prudential - made quite a fuss about this issue the day after earnings, and I assume he got his information from the CC. But I saw no quantification, unless it was included in the equally mysterious 7% figure, which also seems to have emerged from the CC and which seems to be the expected depletion in growth in the next quarter. Victor

To: The Rancher who wrote (2858)	8/3/1998 6:20:00 PM
From: rupert1	Respond to of 5232

Rancher: Some excerpts from what analysts said about the issue, as well as a comment from a Yahoo poster: _Victor____________ <- Previous Next -> Message 4209 of 4232 Reply CA & SOP 97-2 CaptainTX Aug 3 1998 4:49PM EDT I worked for a CA reseller, and spend a fair amount of time with analysts covering the software industry. Some quotes from them on this topic follow. While I do not believe that any company (covered by GAAP, generally accepted accounting principles) can take 100% of a mutli-year maintenance deal to revenue in year one, analysts such as Gartner and IDC have held recently that CA's Unicenter sales figures might well reflect an inordinate percentage of wrap&roll revenue and little "new customer" revenue. Stock market analysts also noted the effect that these deals have in their downgrade notices folloowing the 21 July announcement. There would appear to be huge "restatement" potential here. It seems that these ERP companies are toeing the line and saying so. Informix has ended "all you can eat" DB software delas this year. Shouldn't CA say something about this? From CNET News [21 July 1998]: Analysts also are concerned about CA's shorter license agreements, which have changed the company's revenue stream. "There's an issue with their licensing agreements," Cooper said. "They are getting shorter commitments, down from five years to three years." Added Paul Dravis, an analyst with NationsBanc Montgomery Securities: "They expected to book a lot more five- and seven-year deals, but now they are getting two- and three-year contracts. Companies want shorter commitments." From Morgan Stanley's 21 July downgrade report: Charles Phillips, an analyst with Morgan Stanley, said the problem may have less to do with Y2K and Asia and more to do with the way the company books deals. "Our sense is that the company has aggressively converted its large customers to multi-year enterprise licenses. These deals tie customers into long term arrangements and the sales force doesn't have to resell and renew the maintenance contracts each year. The deals make business sense and lock competitors out of the account," Phillips said in a report issued Wednesday morning. "However, once these customers have stepped up to enterprise deals, they usually don't need a lot more product until the contract is up. Much like the database vendors, CA may have pulled in multi-year deals at a faster rate than underlying demand. Based on past patterns, CA's mainframe software opportunity isn't completely toast but it will need three of four quarters of rebuilding the pipeline supplemented by customers coming up for renewals. The mainframe business probably posts year over year declines for the rest of the year and then rebounds modestly in F2000." From Goldman-Sachs 21 July downgrade report: * We spoke with management of BMC Software yesterday, who indicated they are not seeing slowing MIPS growth having any impact on their business. Mainframe software vendor Compuware also reported strong mainframe revenue growth yesterday. CA depends heavily on the financing of long term contracts with customers, which cover a range of products and are stimulated in part by ongoing strong MIPS based price increases which encourage customers to negotiate long term license agreements with a significant upfront revenue contribution for CA. We believe CA is more susceptible to push backs by customers than other enterprise software vendors given the maturity of their market, the absolute deal sizes, and also the mix of business which is not related to tiered or MIPS-based pricing and may therefore not provide as strong an incentive to renew deals for long term, multimillion dollar amounts. ____________________________________