http://www.newsday.com/business/printedition/ny-txhind312344946aug31.story

Good Lessons Emerge From CA Battle

$25M duel provides plenty of do's/dont's

By Mark Harrington
STAFF WRITER

August 31, 2001

Hindsight, they say, is the better part of valor ... or something like that.

With the summerlong proxy fight against Computer Associates a thing of the recent past, those who participated in the 70-day contest say both sides, and perhaps the corporate world in general, walked away the wiser.

From the outset, it was clear the long-shot bid of tycoon Sam Wyly to grab board seats was going to be something unique. Anyone who visited the SamWyly.com Web site early in the contest saw that the Texas billionaire was a man of certain ... eccentricities.

But the highly political nature of this contest in particular, the heavy spending for what was viewed as an uncertain gain, the critical window thrust open on a company that closely guards its image - all made this a contest destined for the corporate lesson book.

Just what were those lessons? Experts, participants and the record itself point to a number of things from the Wyly-CA contest that may serve those considering embarking on a similar journey.

Save those letters, and be careful what you write.

Letters dating back more than a year became instrumental in swaying opinion in this contest. Though initially caught off guard by the proxy fight, CA was able to mount an early defense by publicizing the personal letters between Wyly and Walter Haefner, the 21 percent holder of CA shares who supported management.

The letters indicated Wyly's heart wasn't fully in the fight, that Haefner had complete confidence in CA chairman Charles Wang and even positioned Wyly as a big fan of CA and its chief executive, Sanjay Kumar, when they bought Sterling Software.

Be prepared to spend.

As proxy fights go, the combined $25 million spent on this one hit the high end of the scale, according to those who follow proxies. Given the fact that Wyly lost, that values CA's five verbal promises of change at CA at around $5 million each.

"We're in a new league," said Pat McGurn, a vice president at proxy advising firm Institutional Shareholder Services. Others found the price obscene. "For $25 million, you should get more than vague promises to respect shareholders in the morning," said investment banker Gary Lutin, who conducted a forum for CA shareholders.

Bring your eraser.

Mistakes, misstatements and retractions became a cornerstone of both campaigns early on.

Wyly had to pull back a pledge to triple CA's stock price, and he had to fix typos on his proxy statement, while CA had to fix the math on Wang's statement that a $100 investment in CA early on would have made its holder a millionaire (the correct figure was $10,000). The lesson: Check and double check all your numbers before you release them.

Make sure your takeover plan makes sense.

While Wyly won points for lots of preparation, his plan to divide the company into four parts and hire four CEO's instead of one proved disastrous. "His business plan was largely rejected," McGurn noted.

Choose your front man carefully.

Both sides had little problem demonizing the leader of the other camp, but Wyly was proved an easy and early target given that many of the criticisms he lobbed against CA had already been successfully pinned on him. A source close to CA said the target on Wyly's back was so large that CA didn't need to begin "dissecting" other Ranger board members, most of whom had excellent credentials.

"They wisely kept the message on Sam and the business disruption issue," noted a source within the Wyly camp.

Even if caught off guard, develop a reasoned response.

Both sides say CA was caught flat-footed by the proxy contest and Wyly's early sharp attacks. But CA didn't rush out a knee-jerk response. "We knew this was a marathon, not a sprint, and we'd have the time to prepare a strategy and a response," said CA spokesman Owen Blicksilver. During that time, company strategists were able to put together a team of consultants, file a lawsuit packed with juicy allegations against Wyly, and create an issue-based counter campaign to debunk Wyly's message.

Communicate, communicate, communicate.

Wang and Kumar couldn't overemphasize this message during their victory dances Wednesday.

CA's decision to use an outside press contact with wide leverage to comment helped minimize the company's sometimes contentious media relations of the past. What's more, Wang and Kumar were more available than ever before, not just in the media but in personal appearances with crucial institutional holders of CA shares.

Forget the word proxy, this is an election.

The Wyly team recognized this early and hired a "campaign manager" who has worked three U.S. presidential campaigns, and a research firm in Penn Schoen & Berland Associates Inc. that did work for the Clinton administration (for which the Wyly's main spokesman worked for three years).

"A lot of the same tools are there," McGurn noted. "There were the same kind of personal attacks and alleged deal-making for votes," Lutin said.

Correct stereotypes early.

Wyly's handlers say they should have moved earlier to correct the false assumption that he believed he had Haefner's backing and the misperception that Ranger had only 100 CA shares. Sam's brother Charles owns more than 600,000 shares through trusts, but the 100 number kept resurfacing and made Wyly's commitment seem half-hearted, they said.