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CA execs defend practices
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April 30, 2001: 10:58 a.m. ET
Software company refutes charges that accounting model inflates revenue
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NEW YORK (CNNfn) - Computer Associates executives insisted Monday that the software company's change in accounting practices last fall was done to give it a competitive advantage in the market -- not to inflate sales numbers, as suggested in a recent published report.
A New York Times article Sunday said Computer Associates (CA: Research, Estimates) has used accounting tricks to systematically overstate its revenue and profit for years. The report quoted former employees and independent industry analysts.
But Sanjay Kumar, Computer Associates' CEO, said the new business model, which reports both sales and order commitments for Computer Associate products, was done to give investors and analysts a better picture of the company's outlook -- not to give a picture of growth that isn't there.
"Our growth rates actually come down because it evens it out and smoothes it out over time," Kumar said.
As to charges in the story that the company has not been able to diversify its sales base, Kumar said, "I stand by the comment that our business model is successful."
Shares of Computer Associates (CA: down $4.41 to $30.84, Research, Estimates) fell in early trading Monday, though shares were up from the low of the day of $30.50.
Kumar said he believes that analysts and investors who have studied the company's results carefully approve of the company's new accounting practices.
"S&P has moved Computer Associates' outlook to stable," he said. "A number of analysts have clearly done their homework and updated their models. Not every analyst agrees with Computer Associates, but we do believe the people who understand the company, who follow the company closely, agree with the new business model."
He conceded that some analysts have been critical of the company's practices, and said that the company still needs to do more to explain its practices to investors.
"If for some reason we have not been clear enough, shame on us," he said.
The Times story said that it had been rebuffed in its efforts to talk to company officials before publication of the article. It also said it never got a response to a list of questions it was told to prepare, despite repeated requests for the answers. 
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