Sent: Thursday, August 02, 2001 12:22 AM
Subject: Finding the path to $50 per share (and
The article copied below suggests that the
vigor of the controversies has endured beyond the audience's focus.
Everyone seems to have lost sight of what the contest is and
should be about: shareholder value, a/k/a the money.
You have an opportunity -- perhaps a duty --
to decide which slate of candidates is most likely to deliver CA's
potential value to shareholders. In this context, the substance beneath
the spin and squabbling points is often important, and we need to make use
of it. If it applies to the two essential questions suggested on Monday,
- What is the maximum shareholder value that can be
generated by the candidates' proposed business strategy?
- Can the candidates be relied upon to deliver the
potential value to shareholders?
It's time to put a dollar amount on what each side promises, and then to
evaluate the probability of their delivering it to the shareholders.
Let's decide what you need to know from the candidates to do your
If you tell me what you want, I'll try to work it into the
requests being drafted for submission to the candidates. Target date
for completion is Monday, so try to let me know your interests by
GL - 8/1/01
Wednesday August 1, 7:06 pm
Computer Assoc. bidder woos Wall St., gets
By Ilaina Jonas
NEW YORK, Aug 1 (Reuters) - Texas
billionaire Sam Wyly, waging war to wrest control of the world's No. 4
software maker, tried to convince Wall Street on Wednesday that his plan to
break Computer Associates International Inc.(NYSE: CA) into four parts would
get profits flowing by freeing talented employees from an oppressive
But Wall Street yawned.
``We believe there were no new
issues raised during this conference call,'' Andrew Brosseau, SG Cowen
analyst wrote in a research note.
Wyly and two members of his Ranger
Governance Ltd. takeover group detailed their plans for Computer Associates
should they win their proxy fight to control the company.
``We continue to believe that
Ranger will be unsuccessful in its bid for CA, and as proxy deadline draws
near, expect Wyly to become less and less of a factor,'' Brosseau wrote.
``The devil is in the details and
it's hard to understand how a hostile takeover of Computer Associates has
the potential to garner the support of CA employees an senior executives,''
Credit Suisse First Boston analyst Wendell Laidley said.
Wyly has asked shareholders to vote
on Aug. 29 for a slate of 10 board candidates he proposed instead of the
present board. Wyly is seeking to have the new board, of which he would be a
member and most probably its chairman, to oust Chairman Charles Wang and
Chief Executive and President Sanjay Kumar.
``The appointments of a 10-member
board in a hostile context is hardly the magical elixir that will solve CA's
challenges in a manner that is incrementally better than what CA is doing
today,'' Laidley said. ``I've heard zero discussion of who the proposed
operational executives would be -- i.e. who's going to run sales, who's
going to run marketing.''
FOUR PARTS GREATER THAN THE WHOLE?
The Ranger group proposes to break
the company, maker of nearly 1,200 software products, into four groups --
storage management, security management, network management and knowledge
management. Each group would have its own chief executive. Wyly has outlined
this plan before.
The knowledge management unit would
oversee existing database application development, information retrieval and
other products as well has house Computer Associates own company wide
corporate functions such as finance and legal.
Ranger intends create development
teams and reward them with royalties for the new products they create.
``This is not a breakup strategy,
its a break out strategy to liberate smart folks to achieve growth,'' George
Ellis, a former chief financial officer of Sterling Software and Ranger team
Additionally, the Ranger group
intends on creating a ``elite national account organization,'' for large
clients. The elite sales force would would with four separate business
``We think it's just the most
natural arrangement in the world,'' Stephen Perkins, proposed board member
and co-founder of Sterling Commerce told Reuters. ``And it's the one that's
going to allow the customers to enjoy a much better relationship with CA.''
A study Islandia, New York-based
Computer Associates commissioned itself, showed that a majority of those
corporate chief information officers surveyed do not think CA representative
understand their business.
But Goldman Sachs analyst Peter
Goldmacher said he didn't believe Ranger's plan was the answer to CA's
``There is no panacea to cure what
currently ails CA, only time, hard work and execution,'' he said. ``The fact
that the company generates roughly half its revenues from the slow growing
mainframe market will not change with a new execution strategy. These kinds
of transitions just take time.''
Last year when firms such as
Computer Associates, BMC Software Inc.(NYSE:BMC) and Compuware (NasdaqNM:CPWR)
were battered by a fall off in mainframe software sales, each has tried to
tear itself away from a dependence on those sales. Instead they have focused
on beefing up their sales of software made for networked computer systems.
Goldmacher said each growing
software company reaches a point where the breadth of its product offerings
exceeds the capabilities of one single sales person to accurately represent
``While breaking up the company
into four separate operating units to better represent unique product
families could work, it is by no means a sure thing,'' he said. ``One must
consider the risk associated with fragmenting what could be considered a
comprehensive CA solution encompassing all four divisions.''
Instead Goldmacher pointed to BMC's
new sales strategy of having one representative selling the BMC ``vision,''
and coordinating the appropriate product family specialists to address the
opportunity, by product family, in each sales situation.
Laidley said that breaking the
company apart wouldn't make it better focused or more accountable, just more
costly to operate.
``Instead of achieving economies of
scale inherit in a larger organization, and amortizing the infrastructure
cost across the different product areas, under the Wyly plan it would appear
each bushiness unit is forced to replicate the infrastructure creating a
higher fixed cost within each business unit,'' he said.
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