Computer Associates International Inc. chairman and chief executive officer Sanjay Kumar will vacate those positions, the company said Wednesday. Kumar will remain with CA in the newly created role of chief software architect. Board member Lewis Ranieri has been elected chairman. CA will soon name an interim CEO, the company said.
The management change comes amid increasing pressure from investigations by the U.S. Securities and Exchange Commission (SEC) and U.S. Department of Justice (DOJ) into accounting violations in the company’s 2000 fiscal year. CA, one of the industry’s largest software providers, has admitted to booking revenue from contracts before they were finalized to inflate its quarterly results, a scheme that has already led to criminal charges against its former chief financial officer and several of his deputies.
“The changes in Sanjay’s role are not based on the conclusion that he engaged in any wrongdoing. Nonetheless, the conduct in question occurred during his tenure and the board felt this action was appropriate,” Ranieri said in a prepared statement.
Kumar served as CA’s president and chief operating officer during the period in which the accounting violations occurred. In addition to relinquishing his management duties, Kumar has resigned from CA’s board, the company said.
CA reiterated Wednesday its previous acknowledgement that the company cannot predict the scope or outcome of the SEC and DOJ investigations and that the company and its officers may face criminal and civil charges. The four executives charged to date have pleaded guilty to charges including securities fraud and obstruction of justice.
Questions about Kumar’s fate heated up earlier this month when Ira Zar, CA’s CFO until last October, pleaded guilty. Court papers filed by prosecutors indicate they’re gathering evidence against several unnamed executives who allegedly knew of the bookkeeping manipulations. Kumar is widely believed to be one of the investigators’ targets.
Complicating CA’s deliberations about Kumar’s future is the general perception among customers and analysts that even if Kumar was aware of CA’s illegal accounting, the job he’s done to reform the company since taking over as CEO in August 2000 make him too valuable an executive to lose.
“I think they made the best of a bad situation here,” said Susquehanna Financial Group Inc. analyst Gregg Moskowitz, in New York. “It was going to be difficult for them to be perceived well, given the negative perception that existed with regard to Sanjay continuing as CEO. At the same time, they’ve resolved this without having to lose someone who is clearly a very talented, savvy executive who has been responsible in large part for helping the company turn things around.”
Industry analyst Richard Ptak of Ptak Noel & Associates said CA needs to move quickly to fill its CEO vacancy.
“It’s not good news for the company, but it’s not the worst that could have happened,” he said. “I would expect some disruption and some customer concern. I think they’re going to have to put together a program to go out and reassure customers.”
Kumar’s new title leaves the company a lot of latitude in assigning him responsibilities, Ptak said: Kumar could continue as the company’s strategic leader until a new top executive is named.
Meanwhile, he expects CA’s rivals to begin circling overhead in hopes of picking off customers. Hewlett-Packard Co. is particularly aggressive in circumstances like these, Ptak said, and IBM Corp., while less opportunistic than HP, has the product set to attract disaffected CA prospects.
“I don’t think CA can go more than a quarter without a replacement without serious disruptions,” he said.
