CA Inc. (CA">CA) reported third quarter 2011 EPS of 46 cents, in line with the Zacks Consensus Estimate of 46 cents.
Revenue
CA reported third quarter 2011 revenue of $1.165 billion, up 4.0% from $1.122 billion reported in the year-ago quarter. Revenue growth can be attributed to continued focus on execution, as well as its leading portfolio solutions to manage and secure IT infrastructures.
In terms of business segments, Subscription and Maintenance revenue remained flat year over year at $995.0 million. Professional Services revenue was $88.0 million, up 20.5% from $73.0 million reported in the comparable quarter of the prior year. Software Fees and Other generated revenues of $82.0 million, growing 51.8% from $54.0 million in the year-ago quarter.
On the basis of geographical segments,
Bookings
Total bookings in the third quarter were $3.049 billion, down 13.0% from $3.493 billion reported in the prior-year period. Total bookings were primarily impacted by a year-over-year decrease in license and maintenance renewals.
Operating Results
On a GAAP basis, operating income for the third quarter stood at $338.0 million, flat in constant currency and down 3.0% as reported. Excluding special items, such as purchased software amortization, intangibles amortization, restructuring and other costs, and including hedging gains and losses, the non-GAAP operating income for the quarter was $391.0 million, up 1.0% in constant currency and down 1.0% as reported.
Net income on a GAAP basis, for the third quarter was 39 cents per share versus 49 cents in the year-ago quarter. Excluding special items, such as software amortization, intangible amortization, restructuring and other and hedging gains/losses and including stock based compensation, non-GAAP net income in the third quarter was 46 cents per share versus 43 cents reported in the year-ago quarter.
Balance Sheet and Cash Flow
The company reported $496.0 million of cash from operating activities in the third quarter, compared to $342.0 million reported in the year-ago quarter. Cash and cash equivalents at the end of the third quarter were $2.685 billion, up from $2.525 billion reported in the previous quarter. The company has $1.555 billion in total debt outstanding and its net cash position was $1.130 billion.
Guidance
For fiscal year 2011, management expects revenue growth in the range of 4% to 5% at current exchange rates; translating to revenues of $4.48 billion to $4.55 billion. Earnings on a GAAP basis are expected to grow in the range of 8% to 14%, which translates to $1.57 to $1.67 per share, while non-GAAP earnings are expected in the range of $1.88 to $1.98.
CA rolled out decent third quarter numbers. The company also delivered significant growth in its top and bottom lines. We believe that with the revival in the macroeconomic scenario and gradual recovery in IT spending, the company should be able to deliver decent numbers in the upcoming quarters.
On the other hand, we are a bit concerned about intense competition in the software & cloud computing space from big players, such as International Business Machines (IBM">IBM) and Hewlett-Packard Company (HPQ">HPQ). This apart, its high debt balance may pose some challenges going forward.
The company currently has a short-term Buy rating, or a Zacks #2 Rank.
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