sorry i am a little late on this link, but i believe it will help revive memories and provide the area of the ca thread these things were discussed. revisionist history, you have to love businessweek.
exchange2000.com
A Win-Win Situation For Computer Associates' Brass
By Allan Sloan, Washington Post
washingtonpost.com.
Tuesday, February 17, 1998; Page D03
It's not every day that you see corporate executives walk away from an almost-sure billion dollars for themselves. But that's exactly what the three top managers at Computer Associates International Inc., the big, brash and oh-so-New York software company, did last week.
Computer Associates shocked the software industry -- and many of its own shareholders -- by publicly announcing an $8.4 billion offer for Computer Sciences Corp., a much bigger company. If the offer succeeds, Computer Associates says its per-share profit will be diluted for several years. That sent shareholders for the exits, driving down the stock from its pre-announcement high of $58.62 1/2 last Tuesday to Friday's close of 48.37 1/2.
For Chairman Charles B. Wang, President Sanjay Kumar and Executive Vice President Russell M. Artzt, this drop, about what you'd expect such an announcement to do, involves serious money. That's because until last Wednesday, the three softwareteers were almost sure to get more than $1 billion of stock from the company in a few weeks.
For Wang, Kumar and Artzt, $53.33 is the magic number. If Computer Associates' stock closes at or above that price for any 60 days of a 12-month period, they share 20.25 million shares of stock. Before last Wednesday's announcement, Computer Associates stock had closed above the magic number for seven straight days and a total of 16 since October. People were counting the days until Wang, already a billionaire, attained multi-billionairehood.
At the pre-announcement $58.62 1/2, the swag would have totaled about $700 million for Wang, $350 million for Kumar, $117 million for Artzt. Before taxes, of course.
Then came the offer for Computer Sciences. "This shows that we really are thinking about our shareholders," Kumar said in an interview. "If we had waited eight weeks [before announcing the offer], we would have been in the money."
While you have to admire the way these three guys have put the company's and shareholders' interests ahead of their own, you have to wonder whether they have any real chance of getting Computer Sciences at any price. Let alone at $108, which is only 17 percent above Computer Sciences' pre-announcement closing price.
Computer Sciences is heavy into consulting, which is the hot field in computers today. Witness Compaq Computer Corp.'s takeover of Digital Equipment Corp., and the attention being lavished on International Business Machines Corp.'s lucrative consulting business.
Trying to buy a healthy and thriving company such as Computer Sciences is a reversal for Computer Associates, which is famous for buying struggling companies, keeping their products and customers while vaporizing most of their employees.
There's a serious cultural problem here. Wang and Kumar, who work out of New York's Long Island, are loud, funny, direct and sometimes brutal. Computer Sciences is far more corporate.
The companies can't even agree on whether they've had negotiations. Computer Associates says the companies agreed on everything but price. Computer Sciences, based in El Segundo, Calif., says there have been two brief meetings, but nothing resembling negotiations.
That seemed to send Kumar up the wall. "I had a meeting out there," he says, "and then we had a meeting at a neutral site midway across the country, where we met confidentially in a hotel. There are a lot cheaper ways to have lunch." Saying those weren't negotiations, Kumar says, "is like saying, 'I smoked, but I didn't inhale.' "
Responds a Computer Sciences spokesman: "We don't lie."
There's a real irony here. If Computer Associates' bid fails, its stock will probably pop back over the magic $53.33 level, giving Wang, Kumar and Artzt their extra billion. You have to love it. If they win Computer Sciences, they expand their corporate empire. If they lose, they expand their personal fortunes. Talk about win-win.
When and if they get their billion, we may revisit their compensation plan and point out the flaws in it. But for now, it's refreshing to see executives talking with their pocketbooks as well as their mouths.
Allan Sloan is Newsweek's Wall Street editor. His e-mail address is sloan@panix.com.
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