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Market Scan
Computer Associates May
Execute Better In Coming Year
Maya Roney,
11.15.05,
11:33 AM ET
Goldman Sachs research analyst Sarah Friar reiterated an "in-line" rating
on Computer Associates International (nyse:
CA -
news -
people
) after attending the first day of "CA World," the first user conference
for the company's new management team.
"Computer Associates stock could benefit from low investor expectations if
the company is able to deliver improving execution in the coming year,"
said Friar. "However, slow organic growth, a complex financial model, and
the still large amount of work to be done to clean up the mistakes of the
past will likely continue to result in a discounted valuation for the
stock, irrespective of what our valuation work suggests."
At the conference yesterday, Computer Associates management reiterated a
more-focused product strategy around security, systems management,
storage, and business service optimization. Friar said conversations with
customers revealed a high level of interest in a Computer Associates
turnaround but also "a healthy dose of skepticism" along the lines of
"we've heard this before."
"We believe that management's vision is sound, but a discount valuation is
justified based on flattish organic growth and a long way to go to repair
marketplace perception," said Friar.
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