In marked contrast to some other enterprise software vendors, there was nothing downbeat about CA Technologies Q3 2012 results the other day. It proudly presented revenues that were up 10% (reported and at cc) on last year to $1.3bn plus income from continuing operations that was an eye opening 34% up to $263m (even at cc rates there was a 24% improvement). The operating margin jumped a satisfying 4 percentage points to 38%.
What was impressive was that 8 percentage points of the revenue growth was organic, leaving 2 percentage points of growth to come from acquired products. The company benefitted from demand for virtualization technology, service automation and security products. Soaring virtualisation sales are also most a given these days (see EMC growth impresses, VMware does even better). It was good to see security getting the attention it deserves – we flagged security as one of the key trends for 2012 (see Enterprise Software Predictions 2012: Discoveries and Challenges). CA’s Arcot Systems and Interactive TKO security acquisitions are paying their way.
At 3% cc growth (resulting in revenue of $472m), international growth was muted compared to the 15% achieved in North America (which took revenue to $791m). Even after the effects of a $39m license windfall are factored out (the payment arose from a court settlement with another software provider that boosted revenue in North America), the disparity remains.
CA has raised its revenue outlook for the year from 5% to 6% cc, indicating revenue of c$4.8bn.
The results have not made CEO Bill McCraken complacent. There is work to do to stimulate growth in outside the US to create a more balanced business. What was notable was the level of organic growth and the future focus on growing organically, given that traditionally CA has relied on acquisitions. The Q3 results indicate it chose well when acquiring to build its current portfolio.