Computer Associates 2004 Annual Report Download - page 30

This Annual Report on Form 10-K contains certain forward-looking information relating to Computer Associates
International, Inc. that is based on the beliefs of and assumptions made by our management as well as information
currently available to management. When used in this Report, the words “anticipate,” “believe,” “estimate,” “expect,”
and similar expressions are intended to identify forward-looking information. Such information reflects our current views
with respect to future events and is subject to certain risks, uncertainties, and assumptions, some of which are described
under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Factors.” Should
one or more of these risks or uncertainties occur, or should our assumptions prove incorrect, actual results may vary
materially from those described in this Report as anticipated, believed, estimated, or expected. We do not intend to
update these forward-looking statements except as may be required by law.
PART I
Item 1. Business.
(a) General Development of Business
Overview
Incorporated in Delaware in 1974, Computer Associates is one of the world’s largest providers of management software.
We commenced operations in 1976 and completed an initial public offering of common stock in December 1981. We design,
market, and license computer software products that allow businesses to efficiently run, manage, and automate critical
aspects of their IT operations. Our common stock is traded on the New York Stock Exchange under the symbol “CA.”
We have a broad portfolio of software products that are designed to operate with all major business computer hardware
platforms, operating systems, and products marketed by other hardware and software companies. Our software products
include those that we have sold for many years, as well as newer products designed to address our customers’ evolving
business needs. Where appropriate, our products are specifically designed to work well with our other software products.
Because the time, effort, and cost to make different software products work together is high, customers place greater
value on software products that work well with one another.
We have a large and broad base of customers and estimate that more than 95% of the Fortune 500®companies currently
use our products. When customers enter into a software license agreement with us, they often pay for the right to use our
software for a specified period of time. Upon the expiration of the term of the agreement, the customer often must either
renew the license agreement or pay usage/maintenance fees, if applicable, for the right to continue to use our software
and receive support. We experience contract renewal rates of approximately 80%. We believe that the existing relationships
with our customers provide us the opportunity to cross-sell new software products to them.
We are considered an Independent Software Vendor (ISV). ISVs develop and license software products that can increase
the efficiency of computer hardware platforms or operating systems sold by other vendors. Companies that make the
computer hardware and operating systems — including Microsoft, IBM, Hewlett-Packard (HP) and Sun Microsystems —
often encourage and support ISVs. In some cases, these companies sell software that compete with our products.
Business Developments
We occasionally acquire new software technology to complement our existing core software products and divest certain
products that no longer fit with our core business strategy.
In March 2004, we sold our approximate 90% interest in ACCPAC International, Inc. (ACCPAC), to The Sage Group, plc.
(Sage). Our net proceeds totaled $104 million for all of our outstanding equity interests of ACCPAC, including options and
change of control payments for certain ACCPAC officers and managers. We received approximately $90 million of the net
proceeds in fiscal year 2004 and the remainder in fiscal year 2005. ACCPAC specializes in accounting, customer relationship
management, human resources, warehouse management, manufacturing, electronic data interchange, and point-of-sale
software for small and medium-sized businesses. As a result of the sale, we realized a gain, net of taxes, of approximately
$60 million, and approximately 600 employees were transferred to Sage. The sale completed our multiyear effort to exit
the business applications market. Pursuant to Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets,” the prior year assets and liabilities of ACCPAC have been reclassified
as a discontinued operation on the Consolidated Balance Sheets. In addition, the results of operations of ACCPAC, including
the gain on the sale in fiscal year 2004, have been recorded as discontinued operations for all periods presented.
During fiscal year 2004, we made several strategic acquisitions to complement certain of our product lines. These
included eSecurity Online, a maker of security and security-related software; Silent Runner, a maker of network security
software that safeguards electronic property; and Miramar Systems, a leading provider of desktop migration tools. The
aggregate purchase price for all acquisitions was approximately $53 million.
CA 2004 FORM 10-K | PAGE 2