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Technology Stocks : Computer Associates -- Ignore unavailable to you. Want to Upgrade?

To: Marq Spencer who wrote (2920)	8/12/1998 6:27:00 PM
From: rupert1	Respond to of 5232

Brian; Here is the WSJ article. Victor _________________________ The Wall Street Journal Interactive Edition -- August 12, 1998 Computer Associates CEO Vows Growth Prospects Remain Strong By RAJU NARISETTI Staff Reporter of THE WALL STREET JOURNAL NEW YORK -- Charles Wang, chairman and chief executive officer of Computer Associates International Inc., vowed to dispel recent concerns about the long-term health of the software giant, asserting that CA's "fundamentals are very strong." In his first interview since CA shares tumbled 31% in one day after it warned of lower-than-expected earnings, a combative Mr. Wang noted that "overwhelming success is the best revenge," and promised to prove wrong all the "Monday morning quarterbacks" who doubt CA's ability to keep growing at a healthy clip. CA shares, which traded as low as $30.625 after the earnings warning, have since climbed back a bit. They closed Tuesday at $36.8125, down $1, in broadly lower New York Stock Exchange composite trading. But they remain far below their 52-week high of $61.9375 set July 21, a day before the stock plummeted. That plunge followed a conference call during which the software maker issued the unexpected news about slowing sales and profit growth in coming quarters. The company blamed the downturn on customers facing economic turmoil in Asia and on a slowdown in orders for mainframe software from clients spending money to fix their Year 2000 software glitches. Nonmainframe Business CA maintained that its nonmainframe business, which accounts for 47% of sales and had been growing at a healthy 45% rate in recent quarters, was doing just fine. But many analysts have slashed earnings estimates for the next two fiscal quarters and downgraded their rating on the stock amid fears that the nonmainframe business may also be slowing. Company Profile: Computer Associates In the past month, First Call's consensus analysts' profit projection for CA's fiscal 1999 ending March 31 has fallen to $2.24 a share from $2.41. The number of analysts with "strong buy" ratings on the stock is down to two from eight, while the number recommending a "hold" is up to 11 from four. Despite the lowered ratings and reduced estimates, some analysts remain wary. Gibbs R. Moody of Warburg Dillon Read LLC, who downgraded CA to a "hold" as early as January, isn't sure whether the company will meet even the revised estimates for the coming two quarters. "The shock value of CA's comments during the conference call was such that analysts came away without really knowing how severe the future growth expectations could become," he said. "While the stock is much more inexpensive than it was, there may be some further adjustments to the numbers yet to come." Mr. Wang said the issues CA flagged seem confined to the coming two quarters. CA's president, Sanjay Kumar, who joined Mr. Wang in the interview, declined to comment on Wall Street earnings estimates, citing company policy, but added that everyone at the company is "working very hard to meet or beat" the $1.2 billion revenue that analysts expect it to generate in the current fiscal second quarter. Shareholders Meeting Wednesday Those bullish comments could pacify some investors, such as Tom Masi, a managing director at SG Cowen & Co. who manages pension plans with about 500,000 CA shares. Mr. Masi had been hoping Mr. Wang would use Wednesday's annual shareholders meeting to address lingering concerns about CA's short-term prospects. CA doesn't allow nonshareholders into the meeting, held at the company's Islandia, N.Y., headquarters. "Nobody is hiding from any of this," said Mr. Kumar. "But the shareholders meeting is not a press conference." Mr. Wang said he plans to point out to shareholders that the company's "fundamentals didn't change by 30% to 40% overnight," and that it has technology that sets it apart from rivals. Mr. Kumar added that CA is sending a strong message to shareholders by "putting its money where its mouth is" and buying back about nine million shares in the last few weeks. Messrs. Wang and Kumar also played down the notion that investors had punished CA's shares because management issued the cautionary business forecast just weeks after the company's top three executives were given a lucrative $1.1 billion stock grant stemming from a 1995 stock-reward plan. Under the grant, the executives (including Messrs. Wang and Kumar) got the shares because CA's shares closed above $53.33 for a 60-day period. "That plan was put in place in 1995, and it is a good plan," said Mr. Wang. "It is unfortunate that the price did go down afterwards, but we certainly didn't anticipate that." CA executives also expressed confidence that they will prevail in at least three shareholder suits that have been filed against it in the past three weeks _____________________________