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Market Scan
Computer Associates May Execute Better In Coming Year
Maya Roney, 11.15.05, 11:33 AM ET

Goldman Sachs research analyst Sarah Friar reiterated an "in-line" rating on Computer Associates International (nyse:
CA - news - people ) after attending the first day of "CA World," the first user conference for the company's new management team.

"Computer Associates stock could benefit from low investor expectations if the company is able to deliver improving execution in the coming year," said Friar. "However, slow organic growth, a complex financial model, and the still large amount of work to be done to clean up the mistakes of the past will likely continue to result in a discounted valuation for the stock, irrespective of what our valuation work suggests."

At the conference yesterday, Computer Associates management reiterated a more-focused product strategy around security, systems management, storage, and business service optimization. Friar said conversations with customers revealed a high level of interest in a Computer Associates turnaround but also "a healthy dose of skepticism" along the lines of "we've heard this before."

"We believe that management's vision is sound, but a discount valuation is justified based on flattish organic growth and a long way to go to repair marketplace perception," said Friar.

 

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