Computer Associates 2005 Annual Report Download - page 65

Table of Contents
We repurchased approximately $161 million of common stock in connection with our publicly announced corporate buyback program
in fiscal year 2005 compared with $56 million in fiscal year 2004; we received approximately $73 million in proceeds resulting from the
exercise of Company stock options in fiscal year 2005 compared with $57 million in fiscal year 2004; and we paid dividends of $47
million in each of the fiscal years 2005 and 2004. As announced in April 2005, beginning in fiscal year 2006 we intend to increase our
annual cash dividend to $0.16 per share, which is expected to be paid out in quarterly installments of $0.04 per share as and when
declared by the Board of Directors.
Other Matters
In June 2005, we entered into a definitive agreement to acquire Niku Corporation (Niku), a leading provider of information technology
management and governance solutions, in an all cash transaction valued at approximately $350 million, or approximately $280 million
net of cash acquired. Niku’ s primary software product, Clarity IT-MG, is an integrated suite that spans the full IT life cycle, from
investment selection, to execution and delivery of initiatives, to results assessment. In January 2005, we had announced we had signed a
partnership to resell, service, and support Niku’ s Clarity software. We anticipate integrating Clarity IT-MG with our Business Service
Optimization (BSO) unit. The acquisition was completed on July 29, 2005.
In June 2005, we acquired the common stock of Concord, a leading provider of network service management software solutions, in an all
cash transaction valued at approximately $337 million. We also assumed approximately $20 million in net debt from Concord for a total
purchase price of approximately $357 million, excluding acquisition costs.
In March 2005, we announced the settlement of a lawsuit we filed alleging that Quest Software, Inc. (Quest) used our proprietary
information and infringed our intellectual property rights in the development of database administration products. The settlement
agreement also resolves Quest’ s counterclaims challenging the validity of certain of our copyrights. As part of the settlement, Quest paid
us $16 million and has agreed to pay royalties for future product sales under a non-exclusive licensing agreement. Under the agreement,
neither we nor Quest made any admission regarding fault or liability. As a result of the settlement, we reported a $16 million gain that is
included in “Other gains/expenses, net” in the Consolidated Statements of Operations.
In March 2005, we sold our remaining interest in Viewpoint Corporation (Viewpoint), in a private sale for $12 million, net of fees. As a
result of the sale, we reported an $8 million gain that is included in “SG&A” in the Consolidated Statements of Operations. At the time
of the sale, we controlled more than 5% of Viewpoint’ s outstanding common stock.
In November 2004, Fitch Ratings initiated rating of our long-term and short-term debt. This debt is currently rated in the investment
grade rating band.
Our senior unsecured notes are rated Ba1 and BBB- by Moody’ s Investors Service and Fitch Ratings, respectively, and are on stable
outlook. Our senior unsecured notes are rated BBB- by S&P and the outlook is negative. Our CP program is rated A-3, Not-Prime, and
F-3 by Standard & Poor’ s, Moody’ s Investors Service, and Fitch Ratings, respectively.
In September 2004, we reached agreements with the USAO and the SEC in connection with improper recognition of revenue and related
reporting practices during the period January 1, 1998 through September 30, 2000, and the actions of certain former employees to
impede the investigations. Under the related DPA, we agreed, among other things, to establish a restitution fund of $225 million to
compensate present and former Company shareholders for losses caused by the misconduct of certain former Company executives. In
connection with the DPA, we recorded a $10 million charge in the fourth quarter of fiscal year 2004 and $218 million in the second
quarter of fiscal year 2005 associated with the establishment of the shareholder restitution fund and related administrative fees. The first
payment of $75 million was made during the third quarter of fiscal year 2005. The second payment of $75 million will be made in the
second quarter of fiscal year 2006 and the final payment of $75 million will be made in the fourth quarter of fiscal year 2006. Refer to
Note 7, “Commitments and Contingencies” of the Consolidated Financial Statements for additional information.
In September 2004, we announced a restructuring plan that was designed to more closely align our investments with strategic growth
opportunities. The restructuring plan included a workforce reduction of approximately five percent or 750 positions worldwide, slightly
lower than our original estimate of 800 positions. The plan is expected to yield about $70 million in savings on an annualized basis. In
connection with the restructuring plan, we recorded a charge of approximately $28 million in the second quarter of fiscal year 2005 for
severance and other termination benefits, and we do not expect to incur any additional charges related to this restructuring plan. As of
March 31, 2005, we have made substantially all payments under the plan.
In fiscal year 2005, we made several strategic acquisitions to complement certain of our product lines. These included Netegrity, a
provider of business security software and Pest Patrol, a privately held provider of anti-spyware solutions. The aggregate purchase price
for these acquisitions was approximately $505 million, of which $469 million was paid in
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