Computer Associates takes a hit

Despite being fueled by strong client-server revenue growth and slightly beating expectations, Computer Associates (CA) saw its shares hit in early trading today, falling as low as 13.7 percent.

Analysts cut their recommendations and earnings estimates on the stock, with some concerned that sales of CA's flagship product were not faring as well as expected.

Computer Associates shares fell as low as 44-7/8 before finishing the day at 47-1/4, down 4-3/4 points.

CA, a database and business-oriented software maker, cited strong sales of its flagship Unicenter TNG product as driving sales when it announced its third-quarter earnings report yesterday.

The company posted earnings of nearly $340 million, or 60 cents a share, for the quarter ending December 31, 1997, compared with a loss of $313.3 million, or 57 cents a share, a year ago, following its acquisition of Cheyenne Software. Wall Street had expected the company to post earnings of 59 cents a share, according to First Call.

CA's revenues rose to $1.2 billion in the quarter, up from $1 billion reported for the same period in the previous year.

"Our client/server business, benefiting from the success of Unicenter TNG, continues to surge ahead," Charles B. Wang, CA's chairman and chief executive, said in a statement.

CA's Unicenter product also was largely responsible for pushing its sales ahead in the previous quarter. Unicenter is a suite of systems and network management tools for large corporate networks. Industry analysts point to that area as one that is fast-growing.

Research firm Gartner Group predicted that the client/server systems-management market will grow from more than $4.7 billion this year to 9.4 billion by the year 2000.

CA's business in Europe and Asia also made good progress in the third quarter, said Sanjay Kumar, the company's president and chief operating officer.

"International revenue was 33 percent of total revenue. Adjusted for the $41 million negative foreign exchange impact, international revenue would have been up 8 percent," Kumar said in a statement. "Our Asia business, although currently fairly small, had good growth in the quarter"

North American sales grew a healthy 30 percent, he added.

Fully ramped up shipments of CA's Jasmine, its new object database, also contributed to the quarter's positive results.