CA Cuts 800 Jobs

These are turbulent times in Islandia. Computer Associates International Inc. (CA) (NYSE: CA) announced today it is cutting its global workforce by 5 percent, or 800 positions.

The news comes just a week after the company reached an agreement with the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC), drawing a line under the accounting scandal that had dogged CA for the last year. Former CEO Sanjay Kumar and one-time head of worldwide sales Stephen Richards have also been indicted on securities fraud conspiracy and obstruction charges (see CA's Mea Culpa).

A restructuring plan unveiled this morning will touch nearly all of the companys departments, with a strong emphasis on improving productivity, simplifying the company’s product portfolio, and boosting marketing efficiency.

CA executives have expressed their desire to rein in the company’s costs for a number of months. Most software vendors are going through a tough time at the moment, thanks partly to falling license sales and competition from Linux vendors (see Software Slump Is Deal Time).

Earlier this year, CA lowered its guidance for fiscal year 2005, blaming poor performance in the services market (see CA Posts Mixed Results and CA Warning Points to Product Holes).The reorganization is expected to yield around $70 million in annual savings, although the company expects the initial cost to be in the region of $40 million. The job cuts are expected to be completed by the end of October.

Ken Cron, CA’s CEO, must be wondering when his problems will end. Even before the job cuts were announced, the company underwent major boardroom changes, resignations, and financial upheaval related to its accounting scandal (see CA Names Temp Chief, CA CEO Resigns, and CA Delays Final Results).

The company is also living in the shadow of last week’s agreement with the DOJ, which involves the payment of $225 million to compensate shareholders for the losses caused by the misconduct of certain former execs. If CA fails to comply with the terms of the settlement after 18 months, the firm could still face prosecution.

In a statement released earlier today, Cron did the usual CEO thing -- promising the 800 jobs cut wouldn't slow down CA, a sentiment that must infuriate the folks who were sent packing. “This restructuring will have no effect on our ability to fulfill the obligations of the deferred prosecution agreement,” he says. “CA is financially strong, but we must make these changes to grow sales, increase profitability, and remain competitive.”

— James Rogers, Site Editor, Next-gen Data Center Forum0