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Immigrant Success Story Raises Eyebrows

J M Shenoy

For over five years, competitors have assailed Computer Associates's hunger for acquiring rival software firms.

Shareholders in 1999 thwarted an effort by company honchos to award themselves hundreds of millions of dollars in pay hikes and bonuses, in addition to the big money they have already been receiving.

These stories have made many newspaper headlines, as have stories extolling the vision of its founder and chairman Charles Wang and CEO Sanjay Kumar, both immigrants.

But a report in The New York Times under the headline 'A Software Company Runs Out of Tricks', on Sunday offered something new: It accused the Long Island, New York-based company of 'accounting tricks' to cover up a 'mirage' of revenue growth. The report said CA has consistently overstated revenues and earnings for many years.

Over a dozen former sales, accounting and marketing workers were quoted in the article. All spoke on conditions of anonymity.

The newspaper said Wang and Kumar did not respond to requests to address the complaints.

On Monday, Computer Associates (Nasdaq: CA) began hitting back -- detailed press releases went out defending the company's accounting practice, and Sanjay Kumar gave an exclusive interview with Newsday, a Long Island newspaper.

One of the reasons he did not respond to The Times'srequest for an interview, Kumar told Newsday, was because he had heard from a number of people that 'there were very pointed questions being asked.'

'It's like if I meet you in the mall and say, "I heard you beat your wife every day," and you look at me and say, "What do you mean?" and I say again in a very loud cry, "You beat your wife every day, that's what I heard," the damage is done, no matter what I answer, right?'

'I think that's what we're facing in this issue.'

The Times article said CA extended existing contracts about to expire and called the income new sales.

While Kumar acknowledged shortcomings in the company's accounting methods, saying, 'At the end of the day, if we haven't been clear then shame on us,' he also added: 'We're not perfect.'

At the same time he wanted to know why The Times had failed to quote many security analysts who were positive on the business model the company initiated last fall, which allowed customers to purchase its products on flexible terms.

The publication of The Times article had a sharp effect when the stock markets opened: CA shares tumbled more than $ 4 as trading began, then regained most of their footing by day's end, closing down $ 3.06 to $ 32.19, a nearly 9 per cent decline. It closed at $ 31.02 on Tuesday.

The Times article was reported in several newspapers across America. Some newspapers such as the San Francisco Chronicle ran the entire article on Tuesday without mentioning CA's response.

Meanwhile, The Times said it stood by the story.

Its story alleged that several former sales executives said CA sometimes skirts dangerously close to, and sometimes over, sales cutoff periods at the end of a business quarter. Two former CA sales executives, who declined to give their names, said the practice of cutting it too close was fairly common, going sometimes a week or more beyond the close period.

Kumar denied the charge.

One ex-manager detailed a deal valued at more than $ 15 million that was booked for the September quarter. But it was nearly the end of October before a contract was signed, he told The Times.

Kumar told Newsday: 'Not to my knowledge.'

Kumar, whose family fled Sri Lanka two decades ago to avoid the civil war, dropped out of a college in North Carolina to start his own business. He has been afraid of poverty, and wanted to become self-reliant soonest, he had said in an earlier interview.

The Times said while Kumar and Wang took home millions of dollars in pay-checks and bonuses, CA had no qualms in sacking hundreds of workers.

In the Newsday interview, Kumar took 'a more conciliatory stance' on the 'thorny issue,' the daily newspaper said.

He said CA had hired an outside firm to review the cases of those fired without severance payments, and suggested those with lingering issues 'drop me a note.'

'I've asked human resources and someone independent of CA to go look at it,' he said. 'Somebody is reviewing all' the terminations.

He made another promise: 'We continue to do things better and better.'

EXTERNAL LINKS:

A Software Company Runs Out of Tricks

Q&A With Sanjay Kumar

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