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Can New CEO Refire CA's Weakening Revenue Picture?
By: Investor's Business Daily
Three things stand out for big-capCA Technologies ( CA ).
First, the company's annualized dividend yield is 3.4%. Few stocks in its Computer Software-Specialty Enterprise group can match that yield. Most stocks in the group don't pay a dividend.
Second, CA is the second-biggest software maker for mainframes and technology infrastructure, according to researcher Gartner.
While the big dividend pleases income investors, the word "mainframe" translates as "old" to growth investors. About 55% of sales are mainframe-linked.
The third item, though, could be the most important.
On Jan. 7, Michael Gregoire took over as CEO. Gregoire was the CEO at California-based Taleo whenOracle ( ORCL ) acquired the firm in 2012.
Gregoire embraced the takeover because, as he said at the time, the move was best for the shareholders. Of course, Gregoire was a large shareholder himself, but that's exactly what savvy investors want.
They want the CEO to think like a shareholder rather than like a mere jobholder.
Can Gregoire refire CA?
Gregoire inherited a company that hasn't seen revenue grow in double-digits for two years in a row (or more) since 1995-98. In the fiscal year ended in March, revenue fell 4%. The Street expects another 4% drop in fiscal 2014 and then 1% growth in fiscal 2015.
At the earnings call Wednesday, Gregoire said acquiring new customers is key to jacking up sales. "Over the past 12 months, we added more than 460 new logos," he said.
Cloud revenue is another area that holds long-term potential for revenue growth. "We're early days on this," he said, and the "awkward part" is that software as a service involves smaller transactions. "So you don't really get to see that move the revenue needle in a short period of time."