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European News Hits Computer Associates Stock Hard

Sat., Dec. 28, 1996

Computer Associates International Inc. shares plunged after the software maker warned of disappointing third-quarter sales as its switch to new products bogs down in Europe.

Computer Associates shares dropped $13 to $48.75 in trading of almost 18 million, making it the most active U.S. stock. It was a 21 percent drop.

Computer Associates has been shifting its focus to selling client-server software that manages computer networks and scaling back products that run big mainframes. The company said its sales force in Europe hasn’t been aggressive enough in building the new business, dropping revenue as much as 17 percent below forecasts.

“They are bringing on new technology. There are execution issues that need to be resolved,” said Monish Bahl, an analyst at Parker/Hunter.

The company said it expects revenue for the three months ending Tuesday to be $1 billion to $1.1 billion. Investors expected revenue of $1.2 billion, up from $1 billion a year ago.

European sales make up a little more than a third of that, said Doug Robinson, senior vice president for investor relations.

“Although client-server is posting nice numbers, it will be September 1998 before revenue becomes significant enough to drive overall revenue growth,” Gibbs Moody, an analyst at UBS Securities, wrote in a research report.

Earnings for the quarter are still on track to meet estimates, the company said.

Some of the stocks that moved substantially or traded heavily Friday:


Westinghouse Electric rose 87-1/2 cents to $19.37-1/2 and Infinity Broadcasting “A” rose $1.50 to $33.

The Federal Communications Commission cleared the way for Westinghouse to buy Infinity Broadcasting Corp. in a deal valued at $3.9 billion. Westinghouse’s acquisition of the company behind shock jocks Howard Stern and Don Imus would create the nation’s largest radio group.

Toy Biz Inc. rose $1.25 to $19.25.

Marvel Entertainment, publisher of the “Spider-Man” comics, said Friday it filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. Marvel is losing money as a result of a sharp decline in its core comic-book and sports trading-card businesses. Marvel’s stock never opened Friday on the New York Stock Exchange. It closed Thursday’s session at $2.37-1/2, down 12-1/2 cents.

Investor Ronald Perelman’s Andrews Group Inc. proposed to invest $365 million in Marvel, allowing Marvel to make Toy Biz Inc. a wholly owned subsidiary of Marvel. Also, Marvel’s lender group has agreed to provide $160 million in new funds to Marvel, which is based in New York. Perelman wants to acquire Toy Biz and make it a unit of Marvel Entertainment Group, which is controlled by Andrews Group.

Groupe AB’s American Depositary Shares fell $2.37-1/2 to $14.50.

The Paris-based home satellite television service received a letter from French television channel TF1 warning that the channel may terminate its contract for the “Club Dorothee” program because of inadequate ratings. TF1 also offered to renegotiate the contract.

Groupe AB said it has “strong defenses” to the charges, adding that 1996 revenues from “Club Dorothee” will reach 115 million French francs.


InVision Technologies rose $6 to $31.50.

The Foster City Calif. company will build and install sophisticated X-ray machines designed to detect explosives in checked baggage under a $52.2 million contract with the Federal Aviation Administration.

Arakis Energy rose 31-1/4 cents to $3.25.

The Canadian independent oil exploration company said it will buy back 10 percent of its common shares.

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