Tech Industry

CA names interim CEO, restates revenue

Computer Associates International board member Kenneth Cron takes the reins as interim CEO, and the company announces that it prematurely booked $2.2 billion in revenue during 2000 and 2001.

Computer Associates International on Monday named board member Kenneth Cron as interim CEO and announced that it had prematurely booked $2.2 billion in revenue during 2000 and 2001.

Cron, who was previously chief executive of Vivendi Universal Games, will take on CEO responsibilities temporarily, as the software company seeks to find a permanent replacement for Sanjay Kumar, who stepped down as chairman and CEO on Wednesday amid an ongoing investigation into the company's accounting practices by the U.S. Securities and Exchange Commission.

Computer Associates also said it has concluded an internal audit of its accounting practices. As a result, CA has restated revenue for fiscal years 2000 and 2001, saying $1.78 billion was prematurely booked in 2000 and $445 million in 2001.

The company used a practice of a "35-day month," which allowed it to recognize revenue from contracts that were not actually completed by the end of the fiscal quarter. In October 2000, the company adopted a new method for recognizing revenue from long-term contracts, one that was designed to correct problems with the previous system.

As a result of the restatement, fiscal year 2000 revenue decreased by $2 million to $6.09 billion. The change did not affect net income or earnings per share, the company said.

In addition, CA said its revenue for fiscal 2001 increased $558 million to $4.75 billion, and its net loss for that period dropped from a previously reported $591 million to a restated loss of $258 million.

Cron joined CA's board in 2002, when the company brought in outsiders to provide more oversight for the company's procedures. Lewis Ranieri, who became board chairman last week, also joined CA's board in 2002 as an independent director.

Cron has experience with the technology industry but has never led a software company. Before working at Vivendi Universal Games, he served as CEO of Flipside, which was purchased by Vivendi Universal. He also worked at technology publisher CMP Media, where he was president of publishing.

On Monday, CA also said that Jeff Clarke, who joined the company earlier this month as chief financial officer, will instead become chief operating officer. In addition, Greg Corgan, who joined the company last year as senior vice president of North American sales, has been appointed senior vice president of worldwide sales, replacing Stephen Richards, who resigned from the company.

Clarke will hold both the COO and CFO titles, as the company undergoes a search for a new chief financial officer in tandem with its CEO search, company executives said Monday during a briefing with analysts and reporters. In addition, the company plans to introduce more controls to its organization, such as the naming of a chief compliance officer, to ensure that improper financial dealings do not occur again, Clarke said.

Overall, CA has spent $30 million in responding to government investigations and conducting the company's own internal audit, Ranieri said. He added that CA will be engaging government agencies "as soon as possible" to conclude the inquiries.

Ranieri said Computer Associates has begun to engage executive search firms in its effort to find a new CEO. Cron said he is not a candidate for the CEO's job.

"We do not have a sense of crisis," Ranieri said in reference to the shakeup of CA's management. "As a result, we want to do the search well rather than quickly."

Cron said his priorities as interim CEO are to expand the company's partnerships and direct the company to sell more to small and midsize businesses.

Under the new organization, Cron will oversee the company's research and development, its technology services, and its legal and communications organization. Clarke will report to Cron and, during the period that the company is looking for a new CFO, his responsibilities will include finance, sales, business development, marketing and human resources.

Like Clarke, CA's new sales chief, Corgan, is a relatively new arrival at CA, having joined the company last year. In his new position, Corgan will be responsible for building and maintaining relationships with customers, Clarke said. Clarke joined CA after several years at Hewlett-Packard and its Compaq Computer, where he was chief financial officer.

The departure of Richards, a company veteran, marks another effort to remove company executives who were in place during the period under investigation. The company fired nine employees earlier this month from its legal and finance departments.

CA's former chief financial officer, Ira Zar, pleaded guilty to charges of conspiracy, securities fraud and obstruction. Two executive vice presidents of finance also have pleaded guilty to conspiracy to commit fraud and obstruction.

Kumar, who is now the company's chief software architect, has not been indicted by the SEC or the New York attorney general's office in connection with the probe. CA's board took the top executive position from Kumar, because he was in charge during the period under investigation.