Reuters, January 14, 2005 article

CA CEO vows to revamp sales force

REUTERS[ FRIDAY, JANUARY 14, 2005 09:20:51 AM]

NEW YORK: Computer Associates International’s new CEO pledged on Thursday to revamp its sales force in an effort to redeem the software company in the eyes of some customers who, over the years, believe they've been bullied.

Almost two months into the job, John Swainson said former management is to blame for CA's bad reputation with customers, which he said was created by an over-aggressive sales force.

"In places where we have good people, the relationship is much better than where we have people who basically are trying to extract every ounce out of the contract," Swainson said in a phone interview from Miami, where CA hosted a meeting with some of its largest customers, who told him about account problems that he called "eye openers."

"We have to earn that right to be their partners, not just vendors," Swainson said, adding that he would expedite the progress the company has made with its customers.

In November, CA hired Swainson, a 26-year IBM veteran, as chief executive-elect to replace indicted ex-CEO Sanjay Kumar just two months after the software maker settled government charges stemming from a $2.2 billion accounting scandal.

He is working with Kenneth Cron, a board member, who is still the company's interim CEO after being named to the post in April.

An analyst, who spoke on condition of anonymity, said Computer Associates in the past would force a customer to buy additional software at high prices by threatening to discontinue support for the software they already bought. They were able to do that because it would be expensive to switch to another vendor.

Frank Dzubeck, president of Communications Network Architects, a technology analysis firm in Washington, said some sales people would take a "hard-nosed approach.

"Instead of looking at customers as a partner, they look at them as an adversary," Dzubeck said.

Swainson was a top sales executive for the software group at International Business Machines Corp., where he had worked since 1978, before he took the top job at Computer Associates. He was chosen to lead the Islandia, New York-based software vendor, partly due to his expertise with customers.

In late September, Computer Associates narrowly escaped prosecution by the federal government. CA agreed to pay $225 million to shareholders in a settlement that let it defer criminal prosecution. As part of the deal, an outside monitor was assigned to track CA's financial reporting for the next 18 months.

Kumar, who stepped down as CEO in April and left CA in June, was indicted in late September in a 10-count complaint that included securities fraud charges. CA's former head of sales, Stephen Richards, also was named as a defendant in the indictment, which followed a two-year investigation. Both men pleaded not guilty.

On Thursday, Swainson said the company now talks to the government on a "fairly infrequent" basis and the discussions are "very informal."

Cron, the company's interim CEO, continues to handle human resources and talks with the government.

Swainson said he has spent more of his time looking at development, thinking about strategy and talking to customers.

He said he plans to educate his sales team to sell systems rather than just products, equipping them with tools that they did not have before. He also plans to expand staff in CA's Tampa, Florida, call center by 10 per cent a year for the next few years.

To be a better vendor, Computer Associates also needs to make acquisitions, particularly in security management, he said.

Computer Associates, which spent $430 million to purchase security software provider Netegrity in October, said it would do more acquisitions in 2005 than in 2004.

"I believe in order to be relevant in this marketplace, you have to be large," Swainson said. "In order to do that, we have to grow, both organically and by acquisitions."

CA's stock fell 21 cents to $27.61 on the New York Stock Exchange. The stock's price is up 9 percent from its close on Sept. 22, 2004, when its ex-CEO was indicted.