Computer Associates 2006 Annual Report Download - page 41

Our credit ratings have been downgraded and could be downgraded further which would require us to pay
additional interest under our credit agreement and could adversely affect our ability to borrow in the future.
Subsequent to the announcement of our delayed filing of the Form 10-K beyond its extended due date of June 29,
2006 and our $2 billion stock buy back program, Moody’s Investor Service (Moody’s) placed the Ba1 ratings of our
senior unsecured notes under review for possible downgrade, Standard and Poor’s (S&P) lowered its ratings to BB
and placed our senior unsecured notes on CreditWatch with negative implications, and Fitch Ratings (Fitch)
downgraded our rating to BB+ with negative outlook.
Moody’s, S&P, Fitch or any other credit rating agency may further downgrade or take other negative action with
respect to our credit ratings in the future. If our credit ratings are further downgraded or other negative action is
taken, we would be required to, among other things, pay additional interest under our credit agreement, if it is
utilized. Any downgrades could affect our ability to obtain additional financing in the future and may affect the
terms of any such financing. This could have a material adverse effect on our business, financial condition,
operating results and cash flow.
We have a significant amount of debt and failure to generate sufficient cash as our debt becomes due or to
renew credit lines prior to their expiration may adversely affect our business, financial condition, operating
results and cash flow.
As of March 31, 2006, we had approximately $1.81 billion of debt outstanding, consisting of unsecured fixed-rate
senior note obligations and convertible senior notes. Refer to Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Contractual Obligations and Commitments”, for the payment
schedule of our long-term debt obligations, inclusive of interest. We expect that existing cash, cash equivalents,
marketable securities, cash provided from operations and our bank credit facilities will be sufficient to meet
ongoing cash requirements. However, failure to generate sufficient cash as our debt becomes due or to renew credit
lines prior to their expiration may adversely affect our business, financial condition, operating results and cash flow.
Failure to protect our intellectual property rights would weaken our competitive position.
Our future success is highly dependent upon our proprietary technology, including our software. Failure to protect
such technology could lead to our loss of valuable assets and competitive advantage. We protect our proprietary
information through the use of patents, copyrights, trademarks, trade secret laws, confidentiality procedures and
contractual provisions. Notwithstanding our efforts to protect our proprietary rights, policing unauthorized use or
copying of our proprietary information is difficult. Unauthorized use or copying occurs from time to time and
litigation to enforce intellectual property rights could result in significant costs and diversion of resources.
Moreover, the laws of some foreign jurisdictions do not afford the same degree of protection to our proprietary
rights as do the laws of the United States. For example, we rely on “shrink-wrap” or “click-on” licenses which may
be unenforceable in whole or in part in some jurisdictions in which we operate. In addition, patents we have
obtained may be circumvented, challenged, invalidated or designed around by other companies. If we do not
adequately protect our intellectual property for these or other reasons our business, financial condition, operating
results and cash flow could be adversely affected. Refer to “Item 1, Business — (c) Narrative Description of the
Business — Technological Expertise”, for additional information.
We may become dependent upon large transactions and the failure to close such transactions could adversely
affect our business, financial condition, operating results and cash flow.
We have historically been dependent upon large-dollar enterprise transactions with individual customers. As a
result of the flexibility afforded by our business model, we anticipate that there will be fewer of these transactions in
the future. There can be no assurances, however, that we will not be reliant on large-dollar enterprise transactions in
the future, and the failure to close such transactions could adversely affect our business, financial condition,
operating results and cash flow.
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