CA's Accounting Woes Cost CFO His JobCA's Accounting Woes Cost CFO His Job

Sanjay Kumar, chairman and CEO at Computer Associates, knows software buyers worry about the financial health of their most important vendors. So last week when he asked for and accepted resignations from three executives, including CFO Ira Zar, Kumar issued a letter to customers trying to persuade them that the inaccurate accounting that led to the dismissals is in the company's past.

The resignations came after an investigation by an internal audit committee headed by CA director and former Securities and Exchange Commission chief accountant Walter Schuetze. The committee concluded that CA recorded revenue assuming contracts would be signed during the fiscal year ended March 31, 2000. The deals came through, the report says, but many not until the following quarter. Lloyd Silverstein, senior VP of finance, and David Rivard, VP of finance, resigned along with Zar.

CA changed its business model so that it recognizes revenue over the life of a contract, not the quarter it's signed. "The committee is confident in the company's new business model and believes the company's current accounting and financial reporting are sound," Schuetze said in a statement. That likely helped Kumar get through one of his toughest weeks as CEO.

Yet until they're replaced, working without such top executives won't be easy. "These people [forced out] are high enough, and it could impact CA's ability to perform," says Richard Ptak of Ptak & Associates, a systems-management consulting firm.

CA has grown revenue recently, pushing sales up 6% for its most-recent quarter, though its pay-by-the-drink pricing option gets mixed reviews. But ultimately, CA's success hinges on customers such as Sedgwick Claims Management Systems, which uses ARCserve, the backup and recovery product that's now in CA's BrightStor suite. Jeff Brady, a senior NT administrator at Sedgwick, doesn't like that CA cut out 90 days of free support with an upgrade. In fact, the company isn't planning to upgrade. "We're trying to move from ARCserve, but for functional reasons," Brady says. "Most of ARCserve is used to recover files, and we'll do that with Shadow Copy on Windows 2003."