The atrium lobby of Computer Associates' headquarters is a soaring, sky-lit space with balconies overlooking workers heading in and out of the company cafeteria.
On a recent day, a dozen or so signs were hanging from those balconies, giving the lobby the appearance of a college dorm before a pep rally: "Vote CA!" "Accounting/Finance supports CA," "You can't go wrong with Charles and Sanjay," "Read my lips: Vote for Charles and Sanjay."
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Charles and Sanjay are Chairman Charles Wang and President and CEO Sanjay Kumar. And the votes that the employee-supporters are asking for are part of a proxy fight that is challenging their control over the fourth-largest software company in the world, amid accusations of accounting shenanigans, strong-arm sales tactics and shareholder dissatisfaction.
Texas billionaire businessman and investor Sam Wyly has launched a bid to take over the software company and replace current management with a new board.
Wyly charges CA management with "chronic abuse of customers and employees," and using accounting tricks to artificially boost sales figures.
Wyly, who has seen two of his companies, Sterling Software and University Computing, sold to CA, has proposed splitting the company into four divisions that would handle storage, security, systems management and knowledge management.
CA has fought back--hard. In addition to holding press conferences and issuing press releases fighting Wyly's claims, the company has filed suit against Wyly, arguing that his fight violates a non-compete contract he signed, as well as some proxy rules.
Wyly isn't alone in taking aim at CA's accounting methods.
The company recently switched to a new business model in which it books revenue from software licenses over the life of the contract, instead of up front. Although this will allow CA to level out its revenue over time, it also resulted in a sharp drop in sales.
To explain the difference to investors, CA began including "pro forma pro rata" results in its press releases, showing what the quarter's results would have been had they switched to the new business model years earlier.
While the company argues that this is intended to make comparisons easier for investors, critics charge that it artificially inflates CA's performance. Indeed, in the most recent quarter, the pro forma results were able to turn a net loss into a profit.
We spoke with Kumar and Wang last week at CA's headquarters.
