The overall picture painted by CA Technologies’ Q4 and FY 2012 results is attractive but there are some jarring aspects. The difference in international performance compared to the business as a whole stands out, and the 2013 outlook is muted (revenue is expected up increase just 2%-4% constant currency to $4.85bn-$4.95bn).
Although overall revenue was up 5% (6% cc) to $1.19bn in Q4 due to good demand for services (up 13%) and enterprise solutions (up 10%), international revenue was flat. That suggests UK growth was negative. It was a costly quarter for the group as a whole with operating income up just 1% to $301m and the operating margin down two percentage points. Overall, services, virtualization and security performed well but revenues from mainframe solutions barely moved (up 1%). Of the 5% growth, 3 percentage points came from organic growth, 2% from acquisitions. This suggests acquisitions could be working harder, which is something management picked out as a goal for 2013.
The full year picture looks better with revenue up 9% (7% cc) to $4.8bn and operating income of $1.39bn, an 11% increase. Smaller competitor BMC Software who also reported Q4 and FY figures this week, delivered 5% total revenue growth so CA is outperforming. The operating margin expanded from 28% to 29%. Of the 7% cc revenue increase, 5 percentage points derived from organic growth, 2 points from acquisitions. However, the results benefited from a large IT outsourcer renewal booked in the fourth quarter of fiscal year 2011 and a final license payment received in the third quarter of fiscal year 2012 that will not recur. Again international performance lagged US, with revenue up just 5%.
The overall numbers are solid but there are below-the-surface issues around the performance of CA’s acquisitions and EMEA. Just 38% of its revenue come from outside the US which is low for a company of its size so it is not surprising that the company has flagged up the need to focus on growth markets in Latin America and Asia as one of its 2013 tasks.