CA Technologies’ new CEO Michael Gregoire (see here) had the task of releasing Q3 results for fiscal 2013 less than three weeks after taking up the top seat, but as all action happened before his watch at least he could distance himself from yet another set of red-coloured results (you can track its performance in the HotViews archive here).
Net income fell 5% (3% cc) YOY on revenue that dropped 5% (4% cc) to $1.1bn. Operating income saw a 10% drop (reported and cc), while the operating margin was down 2 percentage points to 31%. In terms of the divisions, the mainframe segment was down 9% (8% cc). A one-off single licence payment of $39m boosted the year ago quarter and effectively contributed 6 percentage points to the Q3 decline but even this could not mask the underlying trend. Enterprise solutions managed flat revenue, the services segment was down 6% (5% cc).
Gregoire was succinct in his evaluation of the company – it is slow to innovate so is unable to differentiate in fast growing markets, the cost of sales is too high, and acquisitions will do nothing for it if is not able to improve innovation and its go-to-market model. That covers the key aspects of the operation so he has his work cut out to turn this mature business around. With competitor BMC also facing upheaval, it is not a good time for IT management software companies with bulging portfolios.
However, there are glimmers of hope. CA Technologies has a foot in some of the growth areas, including server virtualisation, and infrastructure management was called out as doing well. Nimbus, its mid-market managed services provider software business, was also as identified a growth area. The company also has the AppLogic cloud platform to work with which is designed for cloud services providers and SaaS providers. It looks like these will be the focus of activity, especially given Gregoire’s cloud credentials. Despite the lower top line, CA made no changes to the FY13 outlook of revenue growth in the minus 3% to minus 1% range (cc), which is progress of sorts.