CA sees profit drop

Chief executive reveals plans for "expense reduction" to "improve CA's efficiency"

CA grew its turnover by three per cent to $956m during its first financial quarter of 2007, but has seen its profit decline by 64 per cent to $35m, compared to the same period last year .

CA also experienced a $48m decline in cash flow from operations to $46m, compared to the same period last year, which it attributed to increased disbursements to vendors and efforts to reduce its own payable cycle.

John Swainson, chief executive of CA, said in a statement: "We are not satisfied with out cost structure and we are implementing an expense reduction plan to improve the company's efficiency and competitive position."

Total product and service bookings grew by 16 per cent to $558m. Direct product bookings increased by 14 per cent to $384m and indirect bookings grew by four per cent to $72m, compared to the same quarter last year respectively.

The vendor also saw its total expenses for the quarter rise by nine per cent to £905m, compared to the same period last year. CA attributed this to several factors, including higher personnel costs due primarily to its recent acquisitions, such as MDY Group (CRN, 13 June).

In response, CA also announced that it plans to initiate a workforce reduction programme, about half of which will affect its North American operations.

"The initiative we announced today reflects our ongoing commitment to improve the efficiency of our operations, reduce our operating expenses, improve our rate of return on invested capital and deliver a stronger bottom line performance," said Michael Christenson, chief operating officer at CA.

David Bradshaw, principal analyst at Ovum, said: "CA's problem with costs is not new, there was clearly a problem in the previous quarter's results. While the fall in profits is discouraging, the low rise in revenue is part of a serious long term problem."