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The Wall Street Journal  

November 23, 2004 2:19 p.m. EST

Wall Street Sees New Computer Associates CEO As Good Fit

November 23, 2004 2:19 p.m.


NEW YORK -- Computer Associates International Inc.'s (CA) choice of chief executive, John Swainson and his IBM pedigree, received nods up and down Wall Street Tuesday.

"From what we understand from Swainson's background" at International Business Machines Corp. (IBM), "he comes in with very strong credentials, and is a very good fit within the company," said NWQ Investment Management Chief Investment Officer Jon Bosse.

"We think the rest of the investment community will find that there's not going to be any substantial reason to be negative on this company going forward. It has a compelling valuation, high cash flow, and lots of opportunities in this company to increase revenues," Bosse added.

Asked why Computer Associates' stock didn't react to Swainson's appointment, Bosse noted that shares have performed well over the past couple of months as the Securities and Exchange Commission and U.S. Department of Justice settled their investigations.

Despite recent gains, however, "we still feel the stock is a tremendous value, with very low expectations."

Computer Associates is the Los Angeles money manager's largest holding, although NWQ recently sold 628,000 shares as the stock reached the maximum weight permissible in some of its accounts. NWQ, which is Computer Associate's fourth-largest shareholder, continues to buy CA stock every day with new accounts, however.

As reported by The Wall Street Journal, Swainson will be CA's president, chief executive and director, filling an eight-month vacancy at the company. The 50-year-old executive will report for four to six months to acting Chief Executive Kenneth Cron, who has a contract for the top post through March.

"While Swainson's name is not a household word in the industry, this looks like a very strong hire," Prudential Equity Group analyst Michael Turits wrote in a recent research note.

Swainson's long tenure at IBM, given its importance as a CA competitor in addition to the development of WebSphere into a highly successful business, were attributes Turits cited for his favorable view.

That opinion was echoed by Susquehanna Financial Group's Gregg Moskowitz, who touted Swainson's "years of software experience on several fronts - development, sales and marketing."

Moskowitz owns no shares of Computer Associates, which he assigns his firm's top rating, and also attributed investors' lukewarm reception to the stock's recent outperformance. Shares recently traded at $30.02, down 0.3%, or 9 cents, near the 52-week high of $30.48 reached Friday.

He cited as well the fact that Swainson wasn't the most prominent candidate for the spot. Indeed, the analyst said the CEO-elect "wouldn't have been on many people's short list...Some out there were hoping for a really big name everybody would recognize."

But "wow factor" aside, Moskowitz said Swainson "certainly has all the tools to take the company to the next level."

Having managed about 8,000 employees at IBM, he has proven he can lead a large group, the analyst said. The new executive also complements the talent CA has brought in from Oracle (ORCL) and IBM, he noted.

In short, Moskowitz said, Computer Associates is "extremely happy with who they got."

-By Michelle Rama, Dow Jones Newswires; 201-938-4046;

URL for this article:,,BT_CO_20041123_005468,00.html

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