EXHBIT 99.2
Contacts:
Yvette Gutierrez, Investor Relations Lisa Savino, Investor Relations
631-342-4078 631-342-2788
[email protected] [email protected]
Bob Gordon, Public Relations
631-342-2391
[email protected]
COMPUTER ASSOCIATES INTRODUCES NEW BUSINESS MODEL TO
DELIVER MAXIMUM VALUE TO SHAREHOLDERS AND CLIENTS
Provides Greater Flexibility in Software Procurement
And Quarter-to-Quarter Revenue Predictability
ISLANDIA, N.Y., October 25, 2000 -Computer Associates International, Inc. today
announced a dramatic shift in its business model, offering clients the
flexibility and freedom to adapt to rapidly changing eBusiness requirements
while reducing the risks and costs associated with today's traditional software
licensing model.
This move reflects the radical changes taking place in the relationships between
corporations and large software companies. It is driven by CA's desire to build
stronger relationships with its worldwide customer base, and to unlock
shareholder value by improving both the visibility of CA's revenue stream and
quarter-to-quarter revenue predictability.
"CA's strength has always been in the diversity and excellence of our software
products," said CA President and CEO Sanjay Kumar. "Our new business model
empowers clients to take full advantage of that diversity and excellence while
enabling shareholders to build residual value that transcends quarterly
performance. It eliminates the back-end loaded nature of our business where most
license agreements are concluded in the final days of a quarter. By neutralizing
this hockey stick effect endemic to our industry, the new model will help unlock
the true value of CA."
As the first eBusiness solutions provider to move from an enterprise license
model to a subscription license model, CA will enable clients to determine the
length and dollar value of their software license and vary their software mix as
their business and technology needs change. Clients will have the freedom to use
a variety of software products of their choice during contracted
periods-including month-to-month--and within fixed dollar values.
"Our clients have told us they need more flexibility in how they license
software, and a faster, simpler, more cost-effective way to do business with us
in the new economy," said Kumar. "With this innovative business model, we can
now engage our clients in even more flexible partnerships that map the growth of
their technology to the growth of their business. Backed by our strong track
record of innovation, the new model will ensure that clients can more readily
take advantage of the latest advances in CA technology."
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Clients will be able to flexibly define the length and the dollar value of their
contracts, with discounts determined by both parameters. The new contracts will
be supported by a simpler and shorter license agreement, further reducing the
cost of doing business.
"This new model strengthens our competitive position against hardware vendors
who bundle software and services, and gives us a leg up on independent software
vendors who cling to the traditional enterprise model," said Kumar.
In 1992, CA ushered in a major industry change when it moved from the
traditional IBM model of CPU tier pricing to the enterprise license model, which
allowed clients to license software that could run across an unlimited number of
processors and locations, up to a maximum license capacity. Now, CA is taking
another leadership step. With the new model, clients will have the option of
subscribing to CA software, instead of licensing specific products in
pre-determined quantities.
Under this model, CA will account for contracted revenue over the life of the
license term, thereby generating tremendous residual value at the end of each
quarter. While the new business model will cause CA to change the way the
company recognizes revenue, it does not necessarily change the company's overall
cash generated from operations.
As clients adopt this model over time and CA shifts its operations accordingly,
the accumulated residual value will grow quarter-by-quarter, thereby enhancing
predictability and visibility into future performance as residual value turns
into revenue month-by-month over the contract term.
To ensure that investors and other interested parties can easily compare past
and future performance, CA will supply pro forma, pro rata financial
information. This information will be the basis upon which CA will offer its
guidance and estimates.
CA's client relationship managers and sales executives will visit clients over
the next 30 days to review the opportunities presented by this new business
model.
Computer Associates International, Inc. (NYSE: CA), the world's leading business
software company, delivers the end-to-end infrastructure to enable eBusiness
through innovative technology, services and education. CA has 20,000 employees
worldwide and had revenue in excess of $6 billion for the fiscal year ended
March 31, 2000. For more information, visit www.ca.com.
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(c) 2000 Computer Associates International, Inc. One Computer Associates Plaza,
Islandia, N.Y. 11749. All trademarks, trade names, service marks, and logos
referenced herein belong to their respective companies.
Statements in this release concerning the Company's future prospects are
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. There can be no assurances that future results will be achieved, and
actual results could differ materially from forecasts and estimates. Important
factors that could cause actual results to differ materially include: the
significant percentage of CA's quarterly sales consummated in the last few days
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of the quarter making financial predictions especially difficult and raising a
substantial risk of variance in actual results; changes in industry accounting
guidance; the risks associated with changes in the company's business model; the
risks associated with changes in the way in which the company accounts for
license revenue; the difficulties of compiling pro forma financial information,
given acquisitions over time; instability resulting from changes to the
company's business model; the emergence of new competitive initiatives resulting
from rapid technological advances or changes in pricing in the market; the risks
associated with new product introductions as well as the uncertainty of customer
acceptance of these new or enhanced products from either CA or its competition;
risks associated with the entry into new markets such as professional services;
the risks associated with integrating newly acquired businesses and
technologies; increasing dependency on large dollar licensing transactions;
delays in product delivery; reliance on mainframe capacity growth; the ability
to recruit and retain qualified personnel; business conditions in the
distributed systems and mainframe software and hardware markets; uncertainty and
volatility associated with Internet and eBusiness related activities; use of
software patent rights to attempt to limit competition; fluctuations in foreign
currency exchange rates and interest rates; the volatility of the international
marketplace; and other risks described in filings with the Securities and
Exchange Commission.
