November 23, 2004 9:07 AM PST

CA taps ex-IBM exec as its next chief

Computer Associates International on Tuesday named former IBM executive John Swainson as its next CEO, ending a seven-month search for a permanent replacement for Sanjay Kumar, who was ousted in an accounting scandal.

Swainson will take over as chief executive within the next four to six months. Until then, he will report to interim CEO Kenneth Cron, former CEO of Vivendi Universal Games, who will continue in his position as a director on CA's board.


John Swainson is
CA's incoming CEO.
Swainson, who was also named president and elected to the board, is a 26-year veteran of IBM, where he guided the buildup of the company's WebSphere middleware product line. Most recently, he was vice president for IBM's worldwide software sales, a position he attained in July.

CA Chairman Lewis Ranieri lauded Swainson's track record at IBM.

"John brings a wealth of experience and possesses a unique set of skills including development, sales and marketing, which combined to make him the right person to lead CA going forward," Ranieri said. "CA is on course and building momentum."

During the transition period, Swainson will focus exclusively on product development and marketing and seek to better define the company's product strategy. He said that he intends to build on the company's existing systems management and security businesses and to capitalize on new opportunities, such as wireless, either through acquisitions or internal development.

"My bias will frankly be looking for early ways to enter a market, even with a relatively undeveloped or immature technology team or market," he said.

Swainson said that the recent acquisition of Netegrity, which is expected to close soon, gives CA a major boost in application security and that the company will continue to develop tools that work with a wide range of products.

Management software competitors, including IBM and Microsoft, "all tend to provide things that work well in their own environment," he said. "We can bridge across."

CA will also seek to increase its revenue by expanding overseas and building up its sales channels through business partners, executives said.

Rough year gone by
The appointment of Swainson, who is 50, marks a significant milestone in CA's effort to turn itself around after a tumultuous year. The company pushed out Kumar and several other high-level financial and legal executives during an investigation into its accounting practices. Several executives, including Kumar, have been indicted for allegedly extending reporting periods improperly in order to meet financial expectations.

Kumar has pleaded not guilty to charges of criminal securities fraud. Other executives, including former chief financial officer Ira Zar, have pleaded guilty to charges.

In September, CA paid $225 million to settle charges of accounting irregularities with federal prosecutors. Although it avoided a corporate indictment, CA is being overseen by an independent examiner for about the next 16 months.

As part of its housecleaning in the past year, CA has brought on a fresh management team, including former Hewlett-Packard financial executive Jeff Clarke, who is now chief operating officer and chief financial officer. Other former IBM executives, such as executive vice president of sales Greg Corgan, have joined CA's management ranks as well.

Gregg Moskowitz, an analyst at Susquehanna Financial Group, noted that Swainson was not widely discussed as a person on CA's short list of CEO candidates, but his pedigree at IBM appears to make him a good choice.

"On paper, Swainson possesses all the key characteristics," said Moskowitz, notably strong technical skills and experience in marketing. "We've seen other executives come out of IBM and serve extremely well as CEOs."

Moskowitz noted that CA needs to better integrate its existing products and continue to improve customer support.

Improving customer relations--which have long been a problem at CA--should be Swainson's top priority, said Seth Harris, executive vice president of executive search firm DHR International.

"In his first day and through his first quarter, he should start and finish each day with customers," Harris said. "In a market where large enterprises are consolidating their software platforms and vendors, he needs to prove that they are easier to do business with and (customers) can expect to see more value."

Separately, CA said that it has canceled its annual CA World conference for 2005. The company is "retooling" the event and will look to smaller conferences targeted at customers and partners, Cron said.

 

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