Another top exec leaves CA

Second high-level official to depart; software company sees no connection with financial woes

BY MARK HARRINGTON AND JAMES BERNSTEIN
Newsday Staff Writers

May 11, 2006

Weeks after CA Inc. said it would miss fourth-quarter financial projections amid an earnings shortfall that led it to suspend some commission and bonus payments to its sales force, a second high-level official has decided to bolt the struggling Islandia software giant.

Yesterday, CA's top technologist, Mark Barrenechea, executive vice president and chief technology officer, said he would leave in June to join Menlo Park, Calif., technology investment firm Garnett & Helfrich Capital. CA is conducting a search for his replacement.

Barrenechea, who through his CA tenure maintained a home in the San Francisco area where his new firm is based, said his departure was unrelated to recent turmoil at the company. The new job is "an incredible opportunity," he said.

Barrenechea's unexpected resignation after three years at CA follows that of chief operating officer Jeff Clarke, who left abruptly last month to become chief executive of a division of Cendant Corp. Barrenechea had been CTO for just four months.

In a statement yesterday afternoon, CA chief executive John Swainson insisted there was no link between the recent departures and the financial shortfall. He noted that CA has an ownership stake in Barrenechea's new firm, and that CA will continue to work with it.

In a preliminary fourth-quarter earnings announcement last month, CA noted that despite an anticipated decline in fourth-quarter revenue, sales expenses, primarily commissions, unexpectedly increased. Sources said that increase was $30 million, a figure that led the company to take the drastic step of offsetting the impact by reducing "variable expenses," primarily management bonuses.

But sources said some sales commissions also weren't paid in April, and that some annual pay reviews had also been postponed. "It's causing a lot of strife," said one CA manager who asked not to be named. "It's a huge issue internally."

Discord over the issue heated to such a point that Swainson held an all-hands conference call with CA employees last week, and he is said to have alleviated some of the pressure by saying the company would make good on the commission payments by May's end, the manager said.

A CA spokeswoman declined to discuss the issue.

An analyst who follows CA said the company has dealt with a revolving-door executive suite before, and observers will watch closely to see who fills Barrenechea's spot. But he wasn't as optimistic about the sales commission issue.

"Balancing the books on the backs of the people responsible for sales, if true, is not a good long-term strategy," said Michael Dortch, a principal analyst with the Robert Frances Group, a Westport, Conn., consulting firm. The recent moves also come as CA, working to put distance between itself and past financial scandals, bolsters its communications department with the appointment last month of Bill Hughes, formerly of IBM, to oversee all corporate communications.

Meanwhile, two sources close to the company said another senior vice president of CA is expected to depart the company as soon as Friday. Asked to comment on the report, CA spokesman Robert Gordon said, "No comment."