CA Technologies Shares Fall After Forecast Misses Estimates

CA Technologies Inc., the maker of software for mainframe computers, fell the most in six months after the company’s annual forecast missed estimates and it announced plans to cut 1,200 jobs.

Fiscal 2014 earnings will be $2.35 to $2.43 a share, excluding some items, the Islandia, New York-based company said yesterday in a statement. Analysts had estimated $2.54 on average, according to data compiled by Bloomberg. Sales will be $4.43 billion to $4.52 billion in the period, which ends next March, compared with an analyst projection of $4.65 billion.

Chief Executive Officer Mike Gregoire, who took the helm in January, is paring staff, making acquisitions and refocusing on growth areas. Revenue shrank 4 percent last year at the company, which is seeing its traditional market of mainframe software decline. The latest guidance suggests that Gregoire’s comeback plan will take longer than expected, said Matthew Hedberg, an analyst at RBC Capital Markets in Minneapolis.

“People were expecting a quicker turnaround, but this makes it clear that it’s going to be a longer cycle,” he said. “It pushed out some people’s expectations for return to growth.”

CA shares fell 2.4 percent to $27.11 at the close in New York, the biggest one-day decline since November. The stock has climbed 23 percent this year.

Industry Shift

Gregoire, who joined the East Coast company after a career in Silicon Valley, is coping with an industry shift toward delivering software as a service, or SaaS.

“We know we can do better to drive new sales and revenue performance,” Gregoire said in yesterday’s statement. “When I look at the significant assets at CA Technologies, I believe there is an opportunity for us to improve our performance by stronger focus on product innovation, leveraging customer relationships and better execution in new customer adoption.”

The job cuts announced yesterday will result in one-time expenses of $150 million, CA said. As part of the changes, development sites will be consolidated into central hubs.

“He’s doing what he knows, which is growth and SaaS,” RBC’s Hedberg said. “That’s a different culture than what CA has traditionally been. This is the first wave of changes, but some people are skeptical as we’ve seen this story before with CA, and it doesn’t necessarily change things. It’s more of a ‘show me’ story right now.”

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