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CA puts 35-day month and $2.2bn in revenue behind it

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In a broad housekeeping exercise, CA today admitted to prematurely booking $2.2bn in revenue during 2000 and 2001, named Ken Cron as interim CEO and appointed a new chief operating officer.

The $2.2bn in prematurely tabulated revenue was discovered by CA's internal audit committee during a lengthy investigation. The committee found that CA for some time used a 35-day month to slip revenue into closed quarters. The committee also pointed to its reassuring discovery that CA did not actually make up revenue in 2000 or 2001. Phew.

“The Audit Committee has found that CA had a practice of prematurely recognizing revenue on software license agreements for several years prior to CA's adoption of its New Business Model in October 2000," said Walter Schuetze, head of the audit committee. "These practices included holding the financial period open after the end of the fiscal quarter in order to recognize revenue from contracts that were not executed by the end of such fiscal quarter.

"It's important to note that the '35-day month' practice involved the premature timing of revenue recognition, not the making up of revenues. Thus, the restatement involved the movement of revenue from one quarter to another. This '35-day month' practice was wrong, and CA has taken and will take any remedial steps necessary."

Ken Cron, former CEO of Vivendi Universal Games, has been charged with the task of leading CA through a difficult period. He steps into the role vacated last week by former Chairman and CEO Sanjay Kumar. Amid pressure to resign, Kumar took on the Gatesian role of chief software architect and handed his chairman title to Lewis Ranieri.

Along with Cron's appointment as interim CEO, CA said that CFO Jeff Clarke will take on the additional role of chief operating officer. Clarke joined CA earlier this year after serving as a top exec at HP and before that as Compaq's CFO.

On the fiscal front, CA found that $1.79bn of revenue was prematurely booked in 2000 and another $445m was booked too early in 2001.

CA has restated results to show that revenue decreased $2m in 2000 from $6.094bn to $6.092bn. The 2001 results now show that revenue increased $558m to $4.748bn from $4.190bn. CA said that its results from 2002, 2003 and the first three quarters of 2004 will remain unchanged.

CA is still under investigation by the US Attorney's Office and Securities and Exchange Commission. ®

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