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Forum Report: Mediocrity = $75/share

(August 6, 2001)

From: Gary Lutin
Sent: Monday, August 06, 2001 1:32 PM
Subject: Mediocrity = $75/share

To focus on the key issues in the contest for CA's board, shareholders might ask which candidates are most likely to raise CA's performance to the standard of its industry average.  Put simply, the value of merely achieving mediocrity is about $75 per share.
Below and in the attached file you'll see a presentation prepared by Lance Ettus, as a participant in an Analyst Workshop associated with the CA Forum, comparing the value of CA to an industry average.  Professional comments on the methodolgy will of course be welcomed.  But, more to the point, I'll also welcome comments on what information shareholders need to decide who they should rely on to double CA's value.
                    GL - 8/6/01

Comparisons to Average Valuations
for the
Computer Associates Shareholders Forum
Following is a chart showing how the value of Computer Associates compares with a widely used industry average. It shows, in essence, that management which simply matches the average should more than double the value of CAs stock.

Valuation Ratios

Computer Associates

Multex Software & Programming Industry


Price to Sales (TTM)



Value of CA at ratio



CA Achievement/Average




Price to Book (MRQ)



Value of CA at ratio



CA Achievement/Average



Source of data: Multex/MarketGuide, as of August 3, 2001
We used price-to-sales and price-to-book as conventionally accepted valuation standards for the industry. Comparisons of P/E ratios were considered less meaningful, partly because of CAs accounting practices.
A review of methodology is available, and comments from workshop participants will be appreciated.
Prepared August 6, 2001
Lance Ettus
(718) 592-0313


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