Updated Research Report on CA Inc. - Analyst Blog

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On May 30, 2014, we issued an updated research report on flash storage solutions provider CA Inc. ( CA ) following the company's better-than-expected fourth quarter fiscal 2014 results.

The company's newly introduced product ranges and best-in-class services are likely to cater to increasing demand in the industry and boost revenue streams, going forward. Moreover, CA is witnessing rapid adoption of its Nimsoft Monitor Snap, a feature-rich free utility version of its popular CA Nimsoft Monitor solution, which manages and monitors network, physical and virtual servers, storage and databases. We believe that the wide range of products and the increased efficiency offered by them will attract customers across sectors, lending stability to the business model.

Additionally, CA has also adopted the "go to market," sales strategy. This management technique brings together all the commercial functions including sales, marketing, brand management, pricing and consumer insight. This integration of marketing functions helps to improve the bottom line because it helps the company to take out some costs.

Furthermore, CA has almost completed its restructuring initiative - 'Fiscal 2014 Plan'. Per the plan, the company has nearly completed the layoff of 1,800 employees and consolidated several facilities into development hubs. The leaner cost structure will help the company to improve its profitability as revenue growth picks up in fiscal 2015.

To complement its growth prospects, CA has also resorted to strategic acquisitions. In the past, the Layer 7 Technologies acquisition (an API management company) benefited the company's business. Also, the company signed an agreement to acquire a Texas-based enterprise software company, Hyperformix Inc. With these acquisitions, CA Technologies can strengthen its position in virtualization and automation in the cloud computing environment.

Apart from this, CA's strategic steps to increase shareholder value through share repurchases are also encouraging. During fiscal 2014, the company repurchased shares worth $505.0 million and paid approximately $453.0 million as dividends. Apart from this, CA has authorized approximately a $1.0 billion share repurchase program to be completed in approximately three years. These continued share buybacks are expected to support the company's bottom line going forward.

On the flip side, CA faces stiff competition from International Business Machines Corporation ( IBM ), Oracle ( ORCL ) and Hewlett Packard ( HPQ ), as all the major tech giants are trying to grab a share of this profitable business.

Moreover, currency fluctuations and exposure to Europe remain the near-term headwinds as the company derives a substantial portion of its sales from outside the U.S.

Currently, CA has a Zacks Rank #3 (Hold).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: HPQ , CA , IBM , ORCL

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