Battle for control of CA escalates

Although unable to line up a key shareholder, Texas billionaire Sam Wyly is continuing his ambitious plan to replace the board and management of Computer Associates International Inc.

Wyly announced last week that his firm, Dallas-based Ranger Governance Ltd., is leading a proxy fight to unseat Charles Wang, the chairman of CA, along with the rest of the board. Wyly wants to become chairman himself and then split the software company into four independent units that service the fields of storage, security, systems and knowledge management. Wyly sold his own firm, Sterling Software International Inc., to CA in March 2000 for US$4 billion in stock.

Islandia, N.Y.-based CA, known for playing hardball, has no intention of rolling over and has stated it will stick to its current business model to “yield substantial dividends.” CA management also stated that it has the support of the company’s major shareholder, Walter Haefner, who holds 123 million shares, or 21 per cent of the company.

In addition, CA said today in a statement that it has added two new members to its eight-man board of directors: Lewis S. Ranieri, CEO of Ranieri & Co., an investment firm; and Linus Cheung, deputy chairman of Pacific Century CyberWorks Ltd.

Despite obstacles, Wyly continues to fight on. On Monday, he denounced CA’s response in a statement posted on the Ranger Governance Web site.

“It is the height of arrogance for Wang and [CA president Sanjay] Kumar to publicize Walter Haefner’s pledge of support as a way to intimidate other shareholders from casting their vote against this inept management,” Wyly said. “It is exactly this kind of autocratic attitude that has caused management to ignore and abuse all CA shareholders by destroying shareholder value over the past five years.”

Wyly is still trying to sell CA shareholders on his proposition. On Monday, he went to Boston to meet with Fidelity Investments Inc., said a Ranger spokeswoman, and Wyly will continue barnstorming in New York today. In a webcast this morning to investors, Wyly remained upbeat and said he will need to win about 70 per cent of the independent shareholders to succeed. During the webcast, Wyly and his supporters lambasted CA as a company that abuses employees, customers and shareholders alike and covers its declining revenue by deceptive accounting techniques.

He claimed that: “CA has lost sight of serving the customer. … Ranger intends to restore credibility.” If Ranger is successful, Wyly said, it would publish a plan within 60 days on how the restructuring will play out and where CA’s 800 individual products will fit. Each of the four units he has proposed to create will have its own CEO and will make the company structure more decentralized and responsive to customers. Aug. 29, the day of the CA annual meeting, will be “liberation day,” according to Wyly.

Citing a survey commissioned by Ranger, Stephen Perkins, one of the proposed new board members, said during the webcast that 46 per cent of CA’s customers would like to get out of their commitment with CA. One of the key sticklers is that they don’t like paying high prices to license CA’s flagship management product, Unicenter TNG, parts of which they never use, he said. Moreover, employees live in a culture of “fear and intimidation,” Perkins said.”

The survey, conducted by Penn, Schoen & Berland Associates Inc. in New York, had other harsh statistics. It stated that 41 per cent of the customers interviewed are dissatisfied with CA and that only six per cent are extremely satisfied. The report was based on interviews with 60 CA customers, said the polling firm.

CA President and CEO Sanjay Kumar denounced the survey as “flawed, misleading and inflammatory” and said it “only hurts those who are truly committed to building on CA’s success in the market — our employees and shareholders.” In a statement, CA said a poll it had conducted found that 75 per cent of its clients say they have a “positive working relationship” with the company.

Despite Wyly’s success in garnering publicity, some analysts said they view his quest as quixotic, to say the least.

“The management at CA is probably one of the most experienced, aggressive and competitive in the software solutions provider space,” said Rick Ptak, an analyst at Framingham, Mass.-based Hurwitz Group Inc. “I think they’ve played in a far bigger arena than Wyly has. CA has grown to where it is based on being fierce aggressive salesmen and competitors and I don’t think anything is wrong with that.”