CA Narrows Q1 Loss, Sees Slow Channel Sales

However, President and CEO Sanjay Kumar said the company has slightly lowered its full-year revenue expectations, an adjustment he attributed, in part, to soft indirect channel sales, particularly in the storage management market.

Weakness in CA's professional services business also contributed to the revision, CA said.

CA's storage revenue dropped to $85 million, down from $108 million the same quarter last year.

"Storage is clearly soft for us. I think it's also soft for the rest of the marketplace," Kumar said, during a conference call.

In April, Islandia, NY-based CA launched a channel-preferred sales model around its BrightStor storage products, a program Kumar said "worked well" during the quarter.

"I don't believe it's a competitive issue," Kumar said, regarding weakness in channel storage sales. "I do believe it's an issue tied to, to some degree, hardware storage sales," he said.

Kumar credited CA's subscription-based business model, launched in Oct. 2000, for its revenue growth and narrowed loss.

CA's subscription revenue grew 124 percent to $314 million, up from $140 million during the same quarter last year.

Overall CA completed a greater number of sales transactions during the quarter compared to last year, but the average deal size is smaller, Kumar said.

For the quarter ended June 30, CA reported a loss of $65 million, or 11 cents per share, compared to a loss of $342 million, or 59 cents per share, the same quarter a year ago.

Excluding acquisition amortization, CA reported earnings of 2 cents per share, up from a loss of 24 cents per share the same quarter last year.

Revenue for the quarter climbed 7 percent to $765 million, up from $712 million the same quarter last year.

Wall Street analysts expected the company to report break-even earnings on revenue of $771 million, according to First Call/Thompson Financial.

During the quarter, Ranger Governance, the Dallas-based firm spearheaded by entrepreneur Sam Wyly, disclosed plans to launch a proxy fight for a minority slate of five seats on CA's board, citing CA's financial performance under current management.

Ranger Governance last summer lost a caustic battle for four seats on the board.

"We think it's a plan that will clearly stall the business and won't serve shareholders very well," Kumar said of the Ranger Governance proxy bid.

Shares of CA closed down four cents at $10.21 Monday prior to the announcement, well off its 52-week high of $38.74

In addition, Kumar said CA continues to cooperate with federal investigations into its accounting practices.

CA slightly lowered its revenue expectations for fiscal 2003 to between $3.1 billion and $3.2 billion, down from between $3.2 billion and $3.26 billion. The company maintained its estimates for full-year operational earnings per share in the range of 10 cents to 13 cents per share.

For the second quarter, CA expects operational earnings per share of one cent to two cents per share on revenue in the range of $760 million to $775 million.