Tech Industry

CA faces class-action suit

The suit claims that the alleged misrepresentation of CA's business outlook artificially inflated the company's stock.

Computer Associates was named in a class-action lawsuit that alleges that certain company executives and directors made a series of misleading and false statements about the demand for CA products, business trends, and the impact of the Asian financial crisis on its operation.

The suit claims that the alleged misrepresentation of CA's business outlook artificially inflated the company's stock during the class-action period between January 20 and July 22 of this year.

At one point during the day on July 22, CA shares fell more than 32 percent on CA's warning of approaching tough times due to the Asian Financial crisis and order delays. The stock today was up less than 1 percent at $40.88, having traded as high as $61.94 and hitting a low of $37.13 during the past 52 weeks.

CA issued the warning Wednesday despite having reported positive earnings on Tuesday. The company posted first-quarter revenues of $1 billion, up 18 percent from year-ago figures. Net income for the quarter was $194.2 million, or 34 cents a share, compared with $155.8 million, or 28 cents a share, posted for the previous year. CA slightly beat Wall Street's expectations for the quarter of 33 cents a share, according to First Call.

Nonetheless, analysts at Bear Stearns, Merrill Lynch, and Donaldson Lufkin & Jenrette, among others, cut ratings on CA on Wednesday.

The suit alleges that prior to the disclosure of the adverse facts, certain company executives and directors benefited from the vesting of more than $1 billion in bonus stock grants and sold significant amounts of CA common stock to the unsuspecting investing public. These sales generated proceeds in excess of $40 million, the suit claims.

CA declined to comment on the suit.