CA new CEO says biz has 'room for improvement'
Time for honesty as Q3 sales and profits dip
Just three weeks into his tenure as CA CEO, Michael Gregoire clearly isn't culpable for the fall in both turnover and profits at the software biz and his upbeat tone confirms this.
The firm generated $1.2bn in sales, down four per cent in its fiscal Q3 ended 31 December including a $12m currency headwind. Operating profit slid ten per cent to $370m and net profit fell five per cent to $251m.
"This is the beginning of my third week as CEO of CA Technologies and it's great to be here," said Gregoire, who is replacing soon-to-be-retired Bill McCracken.
Clearly something went slightly awry in Q3 and mirroring sluggishness in the big iron space, Mainframe Solutions fell eight per cent to $622m as renewals dipped. CA said it saw a fifty per cent decline in Mainframe new product sales.
Enterprise Solutions sales were flat at $476m and services revenues dropped five per cent to $97m.
But it's always easier for the new man on the block too look over the business and pinpoint areas for improvement.
Gregoire said he joined the from Taleo Corp, a cloud-based talent management software firm, because CA's total addressable market is forecast to reach $75bn, it has a kit bag full of IP and broad distribution.
"We need to accelerate our innovation curve," he told financial analysts on a conference call last night, "we must differentiate in everything we do. If we do not differentiate, we become commoditised and we will not be able to grow".
He added there was "room for improvement" in its cost of sales - operating expenses fell two per cent in Q3 to $825m - and in "our cadence for getting things done".
The company has a competency is selling complex enterprise contracts, said Gregoire, "but we do not move the needle quickly enough in some of the new product offerings".
And he reckons CA should use its solid balance sheet "prudently" to make "smart investments" and not simply buy a business for revenues sake in the hope to run it more efficiently. ®