--Fiscal 2013 outlook cut second time this year
--Rebound not expected during second half of year
--Executives blame poor sales execution, weak economy
(Adds details from executive conference call, analyst comment,
fresh stock quote.)
By Drew FitzGerald
CA Inc. (CA) slashed its earnings estimates for the second time
this year and reported weaker quarterly earnings amid its
continuing struggle with a sales-force overhaul.
Cost-cutting helped the business-technology company post a 5.9%
lower second-quarter profit, in line with analysts' expectations,
despite a 4% revenue decline caused by weaker subscription and
maintenance revenue. The company has been shuffling its sales force
to better drive new product revenue outside of renewal contracts,
producing disruption in the past.
"Driving this amount of change in an unpredictable economy
proved more difficult than we anticipated," Chief Executive Bill
McCracken said on CA's conference call with analysts. "Because of
our transition to segment marketing and expectations that the
[economy] will not recover significantly, we are not projecting a
rebound in the second half of this fiscal year."
The company lowered its full-year projections calling for a core
profit between $2.36 and $2.44 a share on $4.58 billion to $4.67
billion of revenue. CA's scaled-back July estimates had predicted a
$2.45 to $2.50 per-share profit and revenue of $4.74 billion to
$4.80 billion.
Shares dropped 5% to $23.65 after hours, erasing some of their
23% gain year-to-date.
The maker of software for computer systems and mainframes has
now posted slight revenue declines for two consecutive quarters,
following a streak of revenue gains for more than a year. Mainframe
maintenance yields particularly strong margins because there are
fewer companies qualified to operate and upgrade often outdated
systems.
The Islandia, N.Y., company this month partnered with software
developer Citrix Systems Inc. (CTXS) to add its management software
to some of Citrix's cloud-computing products, which use distributed
machines to provide services through a network rather than a single
computer.
Revenue slipped, however, as CA's existing products took longer
to sell. Some corporate and government customers took longer to win
managers' approval for purchases, Mr. McCracken said, prompting the
software provider to hedge its outlook.
Bookings slipped 14% to $837 million in the latest period, a 13%
decline on a constant currency basis, due in part to lower sales of
new products and mainframe capacity.
"It seems like their sales execution is having some problems,"
said Abhey Lamba, analyst with Mizuho Securities. "They clearly
knew that their portfolio was light in the first half of the year
and it was supposed to improve in the second half, and now they're
guiding down.
For the quarter ended Sept. 30, CA posted a profit of $222
million, down from $236 million a year earlier. On a per-share
basis, earnings rose to 48 cents from 47 cents as the latest period
had 7.1% fewer shares outstanding.
Excluding stock-based compensation, amortization and other
items, earnings from continuing operations rose to 59 cents a share
from 51 cents. Revenue fell 4% to $1.15 billion, and was flat on a
constant currency basis.
Analysts polled by Thomson Reuters had projected a per-share
profit of 59 cents on revenue of $1.17 billion.
Subscription and maintenance revenue--which accounts for the
bulk of the top line-- slipped 5.8%. Professional services revenue
edged down 1%, while software fees and other revenue jumped
15%.
-Nathalie Tadena contributed to this story
Write to Drew FitzGerald at andrew.fitzgerald@dowjones.com
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