Computer Associates 2006 Annual Report Download - page 37

Financial Statements). In the short-term, we cannot gauge what impact, if any, the adoption of these reforms
(including the reports of the Independent Examiner) may have on our business, financial condition, results of
operations and cash flow or any diversion of management attention and employee resources from core business
functions or opportunities that may result.
If it were determined that we breached the terms of the DPA or the Consent Judgment, we cannot predict the scope,
timing or outcome of the actions that would be taken by the USAO or the SEC. These actions could include the
institution of administrative, civil injunctive or criminal proceedings, the imposition of fines and penalties, which
may be significant, suspensions or debarments from government product and/or services contracts, and other
remedies and sanctions, any of which could lead to an adverse impact on our credit ratings and ability to obtain
financing, an adverse impact on our stock price, loss of additional senior management, the inability to attract or
retain key employees and the loss of customers. In addition, our employees could potentially commit illegal acts
which, under the law, may be ascribed to us under certain circumstances. We cannot predict what impact, if any,
these matters may have on our business, financial condition, results of operations and cash flow.
Moreover, under both the DPA and the Consent Judgment, we are obligated to cooperate with the government in its
ongoing investigations of past conduct. While we do not anticipate any further material adjustments to our financial
statements for completed periods arising from those investigations, the processes described above have not been
fully completed and we may be required to take additional remedial measures.
Changes to compensation of our sales organization could adversely affect our business, financial condition,
operating results and cash flow.
We may update our compensation plans for the sales organization from time to time in order to align the sales force
with the Company’s economic interests. Under the terms of the sales compensation agreements, management seeks
to retain broad discretion to change or modify various aspects of the plan such as quotas or territory assignments.
The ability to exercise this discretion is governed by the laws of numerous countries and states within the U.S. in
which CA operates. Where CA does exercise such discretion, the changes may lead to outcomes that are not
anticipated or intended and may impact our cost of doing business and/or employee morale, all of which could
adversely affect our business, financial condition, operating results and cash flow. We modified our commission
plans for fiscal year 2006 which led to substantial unforeseen expenses. The commission plans for fiscal year 2007,
while revised, continue to be reviewed and may be subject to risks similar to those identified above. See Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations”, for how changes made
to the commission plan for fiscal year 2006 impacted results. Refer to Item 9A, “Controls and Procedures”, for
additional information relating to the Company’s identification of a material weakness associated with sales
commissions for fiscal year 2006.
Failure to expand our channel partner programs related to the sale of CA solutions may result in lost sales
opportunities, increases in expenses and weakening in our competitive position.
We sell CA solutions through system integrators and value-added resellers in channel partner programs that require
training and expertise to sell these solutions, and global penetration to grow these aspects of our business. The
failure to expand these channel partner programs and penetrate these markets may adversely impact our success
with channel partners, resulting in lost sales opportunities and an increase in expenses, as well as weaken our
competitive position.
If we do not adequately manage and evolve our financial reporting and managerial systems and processes,
including the successful implementation of our enterprise resource planning software from SAP AG, our ability
to manage and grow our business may be harmed.
Our ability to successfully implement our business plan and comply with regulations requires effective planning and
management systems and processes. We will need to continue to improve existing and implement new operational
and financial systems, procedures and controls to manage our business effectively in the future. As a result, we have
licensed enterprise resource planning (ERP) software from SAP AG and have begun a process to expand and
upgrade our operational and financial systems. Phase one of the implementation was completed in April 2006 and
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