Computer Associates (CA) has issued a shock profits warning, blaming lower than expected sales in Europe, and does not expect revenues to be back on track until fiscal 1998.
The software giant warned that it expects to generate third quarter sales of between $1 and $1.1 billion. This compares with $1 billion turnover in the comparable quarter last year, but analysts had expected to see revenues of $1.2 billion. But the company does anticipate hitting analysts? average earnings estimate of $0.75 per share.
Bud Robertson, CA?s chief financial officer, explained: ?The revenue shortfall was due to a slower than planned transition in European revenues from mainframe to client/server software. There?s a lot of good business in the pipeline, but the number of contracts signed up in December slipped. Our European sales reps are not quite as experienced in selling client/server as opposed to mainframe software, but they?re learning the hard way.?
He does not think the situation was a long term problem, however, and added that CA would make progress in its March and June quarters, but would not be back to where it should be until fiscal 1998.
The European sales teams would be propped up by more technical assistance from the US, Robertson said, and there would be more involvement on the part of senior management in sales pitches. CA also plans to open up to five software demonstration centres in Europe over the next 12 months, with the first one planned for the London region.
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