CA warning sees shares slip 32%

Group set for weak sales during next six months following $500m losses in first quarter. Pieter Preston reports.

Computer Associates' (CA) shares plunged 32 per cent last weekm losses in first quarter. Pieter Preston reports. prompted by a profit warning to investors of flagging sales and income for the forthcoming second and third quarters. On 22 July, CA shares hit a 12-month low, down $20 to $37.50, following the warning.

In April, chief executive Charles Wang used the annual CA conference in New Orleans to reassure shareholders that the Asian crisis was being overstated and predicted strong growth during the forthcoming year.

However, after recording a loss of nearly half a billion dollars for the first quarter ended 30 June, CA admitted the future may not be as bright as it had anticipated.

Despite record sales for the period, a $675 million pay-out after tax to CA's three key executives translated into a one-off charge for common shareholders to pick up the tab. Including the stock issue-related charge, net losses were $481 million against profits of $156 million last year, on turnover of $1.05 billion.

In a statement, Wang said the hardware manufacturer was concerned about the ripple effect of the Asian crisis and its potentially adverse impact on near-term business. 'This, coupled with year 2000 projects and mainframe hardware transition issues, leads us to believe that our revenue and earnings growth will slow over the next several quarters,' he added.

Wang, president and chief operating officer Sanjay Kumar, and vice president Russell Artz all collected on a 20.25 million share option worth $1 billion before tax, which they were to receive if the share price stayed above a certain level for up to 60 days as part of an employee stock-ownership plan.