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Computer Associates International Inc. Outlook Revised To Negative; Ratings Affirmed
Primary Credit Analyst(s):
Philip Schrank, New York (1) 212-438-7859;
Publication date: 27-May-05, 13:37:36 EST
Reprinted from RatingsDirect
NEW YORK (Standard & Poor's) May 27, 2005--Standard & Poor's Ratings Services 
today revised its rating outlook on Islandia, N.Y.-based Computer Associates 
International Inc. to negative from stable. Ratings on the company, including 
the 'BBB-' long-term corporate credit rating and 'A-3' short-term corporate 
credit rating, were affirmed.
      "The outlook revision reflects Computer Associates' recent announcement 
that it has identified apparent improper accounting practices related to 
transactions entered into between fiscals 1998 and 2001," explained Standard & 
Poor's credit analyst Phil Schrank. As a result, the company will make further 
adjustments to its financial statements for fiscals 2000 through 2004, and is 
expected to delay the filing of its Form 10-K for fiscal 2005 in order to 
complete its review. Computer Associates has continued its revenue recognition 
review as required under its deferred prosecution agreement with the 
Department of Justice and its consent judgment with the SEC.
     The company expects the impact of the adjustments to fiscal years 2002 
through 2004 to be minor and not affect current or future cash flows. In 
addition, Computer Associates has determined that former members of senior 
management, who are no longer employed by the company, were involved in 
approving the transactions in question. Nevertheless, Standard & Poor's had 
assumed that Computer Associates' accounting issues were behind it.
     The rating on Computer Associates reflects a stable revenue base, 
favorable business prospects, and strong cash flow generation, partly 
mitigated by a somewhat aggressive posture toward growth and shareholder 
returns. The company's diversified, high-margin software portfolio is viewed 
as defensible because of high switching costs and entrenched customer 
relationships. Customer spending priorities continue to favor security 
software, application server software, and storage software - three prominent 
segments of Computer Associates' product portfolio. Mainframe products, 
although mature, should continue to generate predictable profits and cash flow.

     Complete ratings information is available to subscribers of 
RatingsDirect, Standard & Poor's Web-based credit analysis system, at All ratings affected by this rating action can be found 
on Standard & Poor's public Web site at; under Credit 
Ratings in the left navigation bar, select Find a Rating, then Credit Ratings 
Copyright (c) Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved.


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