On top of a lackluster performance in which profits fell even as revenues rose, management software provider Computer Associates
The improper contracts are a disturbing discovery because the company has had two months since the end of the quarter to locate such issues but only found them now. Moreover, the discoveries continue to keep in focus the accounting scandals that rocked this company and put four executives on courtroom dockets last year. Computer Associates says it found that it had entered into a swap deal with third parties that had no valid commercial purpose, serving merely to allow it to book revenues early. The new management team says it was former managers who were responsible for the deals, and it has referred the findings to the government.
Computer Associates is a troubled company. It has resorted to expensive acquisitions and hype to keep it going. While its acquisition of Concord Communications
As Foolish colleague Rick Aristotle Munarriz pointed out, issuing a press release touting a stock buyback you previously announced is not news. It also smacks of gimmickry to give away your product, as the company did when it offered free one-year trials of its firewall and security software. While it initially caused a ripple effect in the share prices of competitors Symantec
While the scope of the financial restatements isn't known right now, the numbers Computer Associates reported for the quarter are also a question mark. In addition to the just-announced restatements, the company restated some $2.2 billion in revenue last year.
Computer Associates says it earned $17 million, or $0.03 a share, on $910 million in revenues for the fourth quarter. That's down from the $89 million, or $0.05 a share, it earned in the 2004 quarter, when it recorded $850 million in revenues. A leap in expenses, primarily for compliance with Sarbanes-Oxley rules, caused the shortfall. It also took a hit for settling government accounting investigations and repatriating overseas profits. Worth noting for purposes of comparability, the company recorded $60 million in income from discontinued operations in the prior-year period -- net this out and we're looking at a decline in net income from ongoing operations to $17 million from $29 million last year.
We'll just need to wait for the next restatement to see how the quarter actually played out.
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