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CA names new CEO
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August 7, 2000: 8:29 p.m. ET
Kumar given added position; firm also will spin off two units
By Staff Writer Michele Masterson
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NEW YORK (CNNfn) - Software provider Computer Associates announced several organizational changes Monday including a shuffle in top management and the spin-off of two of its businesses.
CA Chairman and CEO Charles Wang said the Islandia, N.Y.-based firm relinquished his position as CEO and named Sanjay Kumar, CA's president and chief operating officer, to take over that additional responsibility. The management change comes as the company copes with disappointing earnings, causing its stock to plunge to 27-1/4 Monday from a 52-week high of 79-7/16.
Separately, CA (CA: Research, Estimates) said that it will spin off two of its fast-growing units, giving them more visibility than they had within CA, which has more than 800 products under its umbrella.
Investors were unimpressed with the moves, with the company's stock gaining only 5/16, or 1.1 percent, to 27-1/4 on a day when the Nasdaq composite index rose 2 percent.
"Noting that this management team has a long history together, we think it will be business as usual for the foreseeable future," said CIBC World Markets analyst Melissa Eisenstat in a research note issued Monday.
In an appearance on CNNfn's Moneyline Monday, CA's Kumar said he believes that the company has stabilized and that its remaining problems have to do with "message and marketing," rather than product quality. He also said that CA will continue to slow down its acquisition of other companies, focusing instead on internal growth. Spinning off the two units will help investors see their potential, he said. (256KB WAV)(256KB AIFF)
"We have 800 products under the CA umbrella, some of which are growing faster than many dot.coms out there, yet they get no credit," Kumar said on Moneyline.
 CA said it will spin off its ASP infrastructure business, known as iCan-ASP Inc. An ASP, or application service provider, hosts software applications on its own servers from its facilities. The spin-off will develop technologies for providing applications through the Internet, wireless and broadband communications.
The second spin-off involves a unit of CA's desktop accounting business, Accpac, and will include other businesses in the future. The company did not provide further details.
"This realignment marks the logical transition from the founder phase of CA to the next level of corporate activity, which is more focused on enhancing shareholder value," Wang said.
"These spin-offs are independent of CA's core businesses," Kumar said. "The ASP market is a hot market with high growth and was not able to achieve the visibility under the CA umbrella."
Dain Rauscher Wessels analyst Sarah Mattson told CNNfn.com that the company probably realizes it has to divest itself of some of its businesses and go after a hot market like application service providing.
 "I think the gap though between today's announcement representing the first step and there actually being an impact from their business probably is a good six months if not longer away," Mattson said. "Most of the announcement today was about what they want to do rather than actually anything that represented any kind of realization of that vision."
iCan-ASP will report results independently of CA, with 40 to 50 CA employees transferring to the new unit. iCan-ASP will not be "huge in size, and will not detract from CA's core revenues," Kumar said.
Nancy Li, chief technology officer at CA, will become iCan-ASP's CEO. Other management includes Doug Robinson, chief financial officer; Mike Her, research and development; George Fischer, sales and marketing; and Ron Nunn, business operations.
"To the extent that they're shifting the focus on shareholder value, that's a good thing and people want to hear that," Morgan Stanley analyst Charles Phillips told CNNfn.com. "The ASP business is just one of many things that they're in and no one business is big enough to make a huge difference in the stock.
"It's going to take collectively lots of these units over time, to create some measurable value for shareholders," said Phillips. "They have a lot of shares outstanding and to make a difference they'd have to have some pretty big actions to float to investors."
 Kumar also disclosed several changes in CA's sales force, which was blamed in part for the shortfall in the company's first-quarter earnings. On July 20, CA reported a profit of $84 million, or 14 cents a share, versus $272 million, or 49 cents a share, in the year-earlier period. The latest results were a penny better than Wall Street's revised estimates, which followed an earnings warning that sent CA shares spiraling. 
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Computer Associates
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