CA offers $10 million to settle probe, posts profit

By siliconindia staff writer   |   Wednesday, 26 May 2004, 19:30 IST
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LAS VEGAS: Computer Associates International Inc has said that it has offered to pay $10 million to settle a federal accounting probe. The software maker also reported higher-than-expected quarterly results. The offer of a settlement with the Government overshadowed the earnings because the company has been hit by a $2.2-billion accounting scandal that caused its former chief financial officer to plead guilty to charges including securities fraud and obstruction of justice. Even as Computer Associates said the offer to settle the investigation was made during its fiscal fourth quarter and is still pending, it did not know if the offer would be accepted. The company said it cannot guess the outcome of the probe or any fine or penalty. However, some investors said they were encouraged that the company was putting an offer on the table. At its annual customer event in Las Vegas, the Islandia, New York-based software maker also reported a profit of $89 million, or 15 cents a share, for its fiscal fourth-quarter ended March 31, beating analysts' consensus by by 1 cent and rebounding from a year-earlier loss of $106 million, or 18 cents a share. Revenue rose 10 per cent to $850 million, helped mostly by strong renewals rather than new wins, it said. DISCLOSURE Newly-named Chief Operating Officer Jeff Clarke, who is also chief financial officer while the company looks for a new CFO, has been praised for analyzing meticulously the financials and providing more disclosure. But many say they still do not understand its accounting, even after hearing the company's explanations. CA's 2005 earnings forecast of 73 cents to 78 cents a share falls short of analysts' estimate of 95 cents a share, but CA said its estimate meets expectations at its high end, after excluding a 13 cents per share impact for the partnership revenue recognition change and 4 cents a share impact for stock options expenses. On a net basis, CA anticipates 2005 net income of 28 cents to 33 cents a share. For its fiscal first quarter ending June, Computer Associates expects a profit of 17 cents a share to 19 cents a share. Profit for its fiscal fourth quarter, excluding items such as the proposed settlement payment, was 18 cents a share. The company has previously said it will correct second and third quarter results due to an accounting mistake, and added it will now also change first quarter results. In after-hours trading, Computer Associates shares fell to $24.71, later recovering to $25 on the INET system following a close of $25.70 on the New York Stock Exchange, unchanged from the day before.

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