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Big Blue exec next CEO

John Swainson, an IBM vet, will be expected to restore credibility to embattled company, analysts say


November 23, 2004

Computer Associates International Inc. is expected today to name John Swainson, a 26-year veteran of IBM, its chief executive following a winter transition period, sources said.

Swainson, 50, who just last July was promoted to general manager of sales for International Business Machine's software division, has a long history at Big Blue, the world's second largest software company after Microsoft. Swainson was chief architect for several of Armonk-based IBM's most ambitious and successful software endeavors, including the industry-standard WebSphere.

Previously, he was general manager of IBM's Application and Integration Middleware group, vice president of IBM Application Development Solutions and director of the IBM Toronto Laboratory. A native of Canada, Swainson, a father of three, has an engineering degree from the University of British Columbia.

The move, first reported on yesterday, marks the highest-level appointment of an outsider at Islandia-based CA, a company long known for its insular, ground-up culture.

Michael Dortch, principal analyst at the Westport, Conn.- based Robert Frances Group, said Swainson is likely to bring a new level of structure to bare- knuckled CA.

"You can almost assume anybody with bonifides that include IBM is well versed in how to run a well-structured, button-down organization," Dortch said.

The company has shown progress in recent months that Swainson must be careful not to upset, he said. "His challenge will be to excise whatever needs to be gotten rid of without blunting the momentum of the positive changes already under way," Dortch said.

But others noted that after acknowledging $2.2 billion in accounting improprieties, purging top management and agreeing to a $225-million deferred prosecution settlement with federal prosecutors, CA required a big lift. Although the chief executive post has been occupied on an interim basis by Kenneth Cron, Swainson replaces Sanjay Kumar, who was indicted on federal charges of securities fraud and obstruction of justice in September. Kumar has pleaded not guilty.

"What they need now is credibility," Laura DiDio, an analyst at Boston-based Yankee Group, told Bloomberg News. "When you have the ex-CEO under indictment, who are you going to call? You want one of these IBM guys; it's like having Eisenhower as president again."

CA spokeswoman Shannon Lapierre declined to comment. An IBM spokesman, acknowledging he'd heard rumors of Swainson's departure, said, "We don't comment on rumors."

Investment banker Gary Lutin, who runs a forum for CA investors, said he expects Swainson's appointment "will be viewed by shareholders as a positive step toward establishing a viable company."

Shares of CA approached their 52-week high yesterday, rising 25 cents to close at $30.11.

Copyright 2004, Newsday, Inc.



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