QUOTE AND NEWS
Cloud Computing  Jul 17  Comment 
CA Technologies (NASDAQ:CA) will webcast its 2014 Annual Meeting of Stockholders on Wednesday, July 30, 2014 at 10 a.m. ET. read more
Cloud Computing  Jul 15  Comment 
CA Technologies (NASDAQ:CA) today announced its CA Layer 7 API Gateway (formerly Layer7 SecureSpan SOA Gateway) has met the rigorous requirements of Common Criteria (CC), an independent security certification recognized by...
TheStreet.com  Jul 7  Comment 
NEW YORK (TheStreet) -- Shares of CA Technologies Inc.  are slightly down -0.31% to $29.30 in after-hours trading on Monday as it entered into a definitive agreement to divest its CA arcserve data protection business to Marlin Equity...
StreetInsider.com  Jul 7  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/CA%2C+Inc.+%28CA%29+to+Divest+arcserve+Unit/9642177.html for the full story.
Market Intelligence Center  Jun 27  Comment 
After closing Thursday at $28.64, CA Inc (CA) presents an attractive opportunity to get a 3.74% return in just 148 days, which is an annualized return of 9.23% (for comparison purposes only). To enter this trade, sell one Nov. '14 $28.00 call for...
Cloud Computing  Jun 4  Comment 
CA Technologies (NASDAQ:CA) announced that it has again received a “Strong Positive” rating – the highest rating given – in Gartner’s “MarketScope for IT Project and Portfolio Management Software Applications” ...
Market Intelligence Center  Jun 2  Comment 
After Friday’s trading in CA Inc (CA) MarketIntelligenceCenter.com's patented algorithms uncovered a trade that offers a 4.91% return or 7.82% on an annualized basis (for comparison purposes only), while providing 6.97% downside protection. The...
StreetInsider.com  May 30  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/U.S.+DoJ+Files+Complaint+Against+CA%2C+Inc.+%28CA%29+Under+False+Claims+Act/9537549.html for the full story.
Forbes  May 23  Comment 
Looking at the universe of stocks we cover at Dividend Channel, on 5/27/14, CA (NASD: CA) will trade ex-dividend, for its quarterly dividend of $0.25, payable on 6/17/14. As a percentage of CA's recent stock price of $29.04, this dividend works...
Market Intelligence Center  May 23  Comment 
A covered call identified by MarketIntelligececenter.com's patented algorithms on CA Inc (CA) could yield about 3.93% (6.01% annualized, for comparison purposes only) in 239 days. Pair a long position in the stock with the Jan. '15 $28.00 call for...




 
TOP CONTRIBUTORS

CA, Inc. (NYSE: CA) sells software that help automate IT tasks such as managing databases, backing up data, and checking for compliance with regulations such as security standards. As data is increasingly becoming digitized and stored, ensuring that security of company networks through encryption, firewalls, and antivirus software will become even more important. Over 99% of Fortune 1000 companies and other governmental, educational, and corporate customers use CA's services.[1] Like most software vendors, CA charges its clients both licensing fees for the software as well as support and maintenance fees. However, CA is different than most enterprise software companies in that the vast majority of its revenues - 80% - come from licensing fees, not service and support.[2]

As one of the four largest IT management companies by revenue, CA benefits from growth of the IT management software market, which the Gartner group expects to grow to $60 billion in 2010 from $44 billion in 2005.[3][4]

In 2007, around forty seven percent of CA's revenue still came from the mainframe market, which has been declining since the 1990s.[5] Mainframes are being replaced by less costly distributed computing systems, which consist of a network of computers working together on a task. While CA sells software for these distributed systems, competition is fiercer in this market due to the large number of vendors.[6] Large IT companies such as IBM and HP also offer bundled services that compete directly with CA's software offerings.

Business Financials

CA generates its income from licensing fees, the right to use their software; maintenance fees, providing technical support and product enhancements; and service fees, providing implementation, consulting, and education services.[7]

Total revenues for the company increased by $171 million or 7% to $3.94 billion for the year that ended on March 31, 2006.[8] The increase was due to growth in their subscription revenue and professional services, which helped to offset declines in software, maintenance, and financing fee revenues.[9] Increased subscription was caused by improved management of contract renewals and an increase in large contracts, which led to a higher average contract length.[10] CA's business is also diversified in terms of geography as 46% of its revenue came from outside of the United States. International sales amounted to $1.81 billion of revenue compared to $2.13 from the United States for the 2007 fiscal year.[11] The numbers represent a 6% increase for revenue from the United States and a 3% increase in revenue from other countries.[12]

Due to increases in operating expenses, however, CA's net income actually decreased from $160 million to $121 million in 2007.[13] The increase in expenses was primarily driven by the increased usage of external consultants and a restructuring plan announced in August 2006.[14] CA was also especially hard hit by the dot-com crash of 2001, which led to a decrease in budget for IT departments in many industries. With companies cutting back on IT spending, CA's services were less needed and nonessential to a company's operation. The company also became the subject of a governmental investigation of past accounting practices that led to a settlement in 2004 in which the company agreed to pay restitution to shareholders and to appoint new management to the company. In 2006, the company also payed $129 million for a new enterprise resource planning (ERP) system to enhance financial transparency.

CA's acquisition-driven expansion strategy has also hurt it in the past due to unsuccessful integration of its acquired technologies with its core business offering. Many of its acquired products were still marketed under separate brands until 2004. Due to these difficulties, CA had a negative cash flow in 2003 and 2004 although it has returned to positive cash flows since 2005.

CA's revenue and net income for the past five years. CA's revenue has been increasing due to higher revenues from subscription fees, but its net income dropped last year due to higher consulting fees and restructuring costs.
CA's revenue and net income for the past five years. CA's revenue has been increasing due to higher revenues from subscription fees, but its net income dropped last year due to higher consulting fees and restructuring costs.[15]
Breakdown of revenue for CA, Inc. in 2007. A great majority of CA's revenue comes from subscription fees that companies pay for the right to use CA's software
Breakdown of revenue for CA, Inc. in 2007. A great majority of CA's revenue comes from subscription fees that companies pay for the right to use CA's software[16]

Trends and Forces

  • CA is Dependent on its Mainframe Business, which is Being Replaced by Distributed Computing Technologies - Approximately 47% of CA's 2006 revenue is related to the mainframe market, which is expected to be flat despite the growth of the IT management sector. Mainframes, which are large data processing systems, are being replaced by distributed computing networks, in which different parts of a program are run simultaneously on many computers connected over a network. CA's new Enterprise IT Management vision is substantially dependent on the mainframe business, and the vision's success is still unproven.
  • Emergence of Web-Based Software Solutions Will Adversely Affect CA's Subscription-Based Model - As increasingly more management software is available on-demand over the internet, traditional software makers such as CA could see their customers turn to these often cheaper solutions. While the market is still small compared to traditional software markets, faster internet connections and the development of web 2.0 will no doubt lead to more sophisticated software being offered online within the next few years. Established technology companies such as Akamai Technologies (AKAM) and VeriSign (VRSN) have already started offering internet-based solutions such as hosted email security and filtering. International Business Machines (IBM), a direct competitor of CA, has tried to make their own into forays into the market by boosting the number of internet-based providers using IBM technology.
  • CA Competes in Many Markets Where Specialized Companies Hold Dominant Market Positions - While the traditional "Big Four" management companies, CA, BMC Software (BMC) , HP, and IBM, are often viewed as offering the most comprehensive enterprise management offerings, a number of public and private competitors offer more effective solutions for particular features and functions. Each competitor has specialization in the market area they are dominant in and examples include Symantec (SYMC) in security, EMC (EMC) in storage management, International Business Machines (IBM) in systems management, and BMC Software (BMC) in database management. Smaller niche competitors also offer new solutions frequently, leading to pricing pressures on CA that hurt its position.
  • CA Has Undertaken a Number of Acquisitions in an Attempt to Accelerate Growth - In 2006 alone, CA acquired data protection software provider XOsoft, management software company MDY Group International, job scheduling software producer Cybermation, and enterprise application solutions company Wily Technologies. CA can use these new products in their growing portfolio as a way to expand into new markets and attract new clients with its broad base of offerings, but it also faces the challenge of integrating these companies into its existing core business. The coming future will show whether management is able to integrate and extract value from these acquired technologies while also growing CA's core business.
  • CA Will Face More Competition from Hardware Manufactures Bundling in Their Own Software - Companies such as IBM and HP sell both hardware and IT management software. These companies have been aggressively promoting bundled offerings to their clients while CA must rely on other companies to provide the hardware to implement its solutions. IBM, especially, has been using its mainframe installation base to offer clients software and consulting services. Bundling also makes it costly to switch companies due to hardware and software compatibility and high training costs. Keeping their existing customers is also a top priority for many IT management companies as these contracts are often multi-year and highly lucrative.

Competition

Over the past year, CA has been aggressively promoting its software by adding nearly 800 sales professionals.[17] The company, however, faces tough competition from other IT management companies and technology companies with a diverse portfolio of offerings.

  • BMC Software (BMC) - Another enterprise IT management company, BMC heavily promotes its Business Service Management (BSM) strategy, which allows companies to manage its IT department from a business perspective. The company also holds strategic partnerships with EMC (EMC) for storage solutions, Symantec (SYMC) for security solutions, and Accenture (ACN) for systems integration.[18] Thus, while CA develops most of their products in-house, BMC relies on other companies for expertise in some of the specific fields they manage.
  • International Business Machines (IBM) - One of the most influential and oldest technology companies, IBM is also one of the largest technology consulting companies in the world. In recent years, it has refocused its business on higher-value, more profitable segments of the industry and and 77% of its sales come from it software and services divisions.[19] IBM also offers a complete set of IT solutions from servers and storage to application management services that CA cannot although this also means that its not as specialized as CA in helping clients realize the business potential of IT.
  • EMC (EMC) - EMC Corporation is enterprise storage producer, focusing on large capacity hard drive arrays and storage management software. Like CA, it offers clients innovative solutions to storing, securing, and managing their data, an increasingly important aspect of IT management as more and more data becomes digitized. However, it lacks the breadth of services that CA offers to clients due to its specialization in data management.
  • Symantec (SYMC) - Known for its Norton Anti-Virus programs, Symantec provides security and storage products and software to both consumers and businesses. With over 24,000 sensors around the world detecting emerging threats on global networks, Symantec products are used by more than 99% of Fortune 100 companies.[20] Symantec's acquisition of Veritas in 2005 also gives it a foothold in the storage sector, which it can successfully bundle with its expertise in security systems.
Comparison of CA and Its Competitors
2007 Revenue (in Millions US$) Percentage Growth Over Previous Year 2007 R&D Expenses (in Millions US$) % Revenue Spent on R&D
BMC[21] 1,580 5.4% 205.4 13%
IBM[22] 98,785 8.1% ~6,000 ~6%
EMC[23] 13.230 19% N/A N/A
Symantec[24] 5,199 25% 867 16.7%
CA[25] 3,943 4.5% 712 18%




Market Share

Total worldwide IT operations management (ITOM) software, from which CA makes the majority of its revenue, increased to $9.9 billion in 2005. CA was second in terms of market share behind IBM and capturing 13.3% of the market. The Garter group is ITOM market is also expected to increase through 2010 as IT departments struggle to cut costs and improve efficiency. CA was also the market leader in job scheduling and asset management software revenue with 33.6% and 19.2% of the market share, respectively.[26]

Worldwide 2005 Vendor Revenue Estimates for IT Operations Management Software[27]
Company 2005 Revenue 2005 Market Share (%) 2004 Revenue 2004 Market Share (%) 2004-2005 Growth (%)
IBM2,398.124.222182.024.89.9
CA, Inc.1,318.413.31194.513.610.4
BMC1,188.4121164.413.22.1
Hewlett-Packard724.97.3576.86.625.7
Quest Software384.13.9323.63.718.7
Other Vendors3,893.139.33359.738.215.9

Footnotes

  1. CA Company Overview
  2. CA Annual Report 2007, Page 45
  3. Gartner Says Worldwide IT Operations Management Software Market Increased 13 Percent in 2005
  4. CA Today
  5. Article: The mainframe's virtual renaissance
  6. Compuware Annual Report 2007, Page 16
  7. CA Annual Report 2007, Page 40
  8. CA Annual Report 2007, Page 45
  9. CA Annual Report 2007, Page 45
  10. CA Annual Report 2007, Page 46
  11. CA Annual Report 2007, Page 48
  12. CA Annual Report 2007, Page 48
  13. CA Annual Report 2007, Page 87
  14. CA Annual Report 2007, Page 51
  15. MSN Money, CA 10 Year Summary
  16. CA Annual Report 2007, Page 45
  17. CA Annual Report 2007, Page 4
  18. BMC Software Corporate Profile
  19. IBM Annual Report 2007, Page 8
  20. Symantec Annual Report 2006, Page 3
  21. BMC Annual Report 2007, Page 24
  22. IBM Annual Report 2007, Page 23
  23. Google Finance EMC
  24. Symantec Annual Report 2007, Page 18
  25. CA Annual Report 2007, Page 40
  26. CA Names Worldwide Market Share Leader for 2006 in Job Scheduling and Asset Management By Leading Analyst Firm Article
  27. Gartner Says Worldwide IT Operations Management Software Market Increased 13 Percent in 2005 Article
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