Computer Associates to cut 800 jobs

By SiliconIndia   |   Thursday, 30 September 2004, 07:00 Hrs
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NEW YORK: Computer Associates will cut 800 jobs, the software maker said on Wednesday, reducing its work force 5 per cent in its biggest cost-cutting effort since 2001 amid slack demand and falling prices for software and services.

Shares of Computer Associates, whose former chief executive was indicted last week on charges related to a $2 billion accounting scandal, fell 1.4 per cent. Analysts voiced disappointment that the new cutbacks will not take savings beyond the $110 million detailed in an earlier plan.

"I was widely anticipating that any cuts would have an additional benefit," said Friedman Billings Ramsey analyst Nitsan Hargil, who rates the stock "market perform."

Chief operating officer Jeff Clarke told investors on a conference call that annual savings of $70 million from the job cuts and other savings of $40 million were already included in the company's full-year operating earnings target of 70 cents to 75 cents per share on revenue of $3.4 billion to $3.5 billion.

Computer Associates, which agreed to pay shareholders $225 million to settle criminal charges and is currently under government oversight, has seen less than robust demand for its system management and storage software. In July, the company trimmed its full-year revenue and earnings outlook.

The job reduction is the largest since October 2001, when the company slashed 900 jobs to better align its staffing levels with its new business model.

One analyst questioned the timing of the job cuts.

"The obvious thought is that CA has missed its quarter and therefore views this as an ideal time to take a restructuring charge," Smith Barney analyst Tom Berquist said.

The company would not comment on its outlook.

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