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New CA chief outlines plans for company

By Mark Harrington
Staff Writer

November 24, 2004




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With two days under his belt as the new president and chief executive elect of Computer Associates, John Swainson yesterday showed himself to be versed in the new and the old ways of his adopted company. He said he'll build on the strengths, address lingering weaknesses and keep CA's fundamental software development efforts local.

Swainson, whose appointment to the new posts was announced yesterday, will report to interim CEO Kenneth Cron through a transition period of up to six months.

In a conference call with Wall Street analysts and an interview, Swainson, 50, said he plans to get the most from CA's 5,000 software developers, while continuing an effort to scour the field for new acquisitions. Cron said Swainson will take over executive development and marketing teams immediately.

Swenson, a 26-year IBM veteran, indicated he has no intention of moving CA from its Long Island base, or farming big projects overseas.

"We have a great team that lives here and we're not going anyplace," he said of Long Island. He expects to spend around half his time in Islandia, he said, commuting from Connecticut, where one of his three children still attends school. Beyond that, he said, "I'm going to figure out where I personally live."

Recent moves by CA to quickly staff a development center in India, he said, are under review. CA in October telegraphed plans to build a development staff of 1,000 in India before year's end from a previous 400.

"We have no intention of moving our development resources off shore," Swainson said. "…We're not moving the company to India. We've kind of frozen it at this point to make sure how well it's working."

Swainson said he plans to capitalize on CA's lead in the security and systems management software markets, and work to correct past problems with customers.

"There's a legacy here of difficult customer relations," he told analysts. "I'm going to be working to improve relationships with customers ... turning customers back into partners rather than adversaries."

On Wall Street, where CA shares gained 5 cents yesterday to close at $30.16, analysts applauded his hiring.

"We believe Mr. Swainson will make a great addition," Nitsan Hargil, an analyst at Friedman Billings Ramsey, wrote to investors. He cited Swainson's "deep knowledge of the software industry" and the fact that he's "an outsider." But some were puzzled by the transition, which one observer called "unusual."

Investment banker Gary Lutin said the arrangement appeared more a "political solution" than a practical one. "That's something you do in the senate, not at a company," he said. "Most authorities on management succession advocate giving a new CEO a clear position of command." CA chairman Lewis Ranieri called it a conventional practice.

Swainson said he'd continue with the open, collaborative environment installed by Cron, saying it's a management style he's comfortable with. But few expect Swainson to be a pushover. In 2000, after rival BEA Systems released a statement saying it owned the middleware market, Swainson fired back.

"BEA is not to be believed on any of this stuff," he was quoted in ComputerWorld Canada as saying. "Frankly, [then-BEA CEO] Bill Coleman is a liar, Bill Coleman does not say anything that is truthful about the marketplace and I would be happy to have you quote me on that."

In his new role, Swainson said acquistions and internal software development will both be key to his strategy, although he suggested acquisitions could take precedence. "My bias will be to look for early ways of entry into a market," he said. CA chairman Lewis Ranieri said Swainson has joined CA's board, bringing members to 10, and added that CA expects to appoint two more outside directors soon.

CA, which purged more than a dozen executives and staffers following federal probes of its accounting, continues to search for a permanent chief financial officer, a position chief operating officer, Jeff Clarke, has filled on an interim basis since April.

Swainson said he doesn't anticipate changes to CA's business model and subscription accounting, noting, "Frankly I like what I've seen so far, but I'm a day into the job ... I believe at some point all software companies will move to a model that looks like this."

Swainson joins CA as the company embarks on an 18-month deferred prosecution agreement with federal prosecutors after the company acknowledged $2.2 billion in past accounting improprieties.

While the deferred prosecution agreement isn't an optimal situation, he said, "We will live with it and abide by the letter of it. Eighteen months will pass and we won't have it anymore."


Copyright © 2004, Newsday, Inc.



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