Computer Associates Signs Record Deal
The 10-year software license agreement gives Computer Sciences Corp. wide latitude in using and reselling CA's systems management and database server software
Computer Associates International Inc. has done it again. One week shy of the one-year anniversary of its landmark software license deal with Electronic Data Systems Corp., CA this month announced it had added yet another key integrator to the software company's list of top-tier resellers.
Computer Sciences Corp. and the Islandia, N.Y., company signed a 10-year agreement that allows CSC to resell up to $50 million of CA's systems management software Unicenter and its database server OpenIngres. Under the license, CSC's Technology Management Group will use CA software on outsourcing contracts and distribute the products throughout the company.
Pete Boykin, president of CSC's Technology Management Group, called the alliance strategically important because "it enables us to be creative in structuring transactions in all our markets." The unprecedented flexibility of the agreement, which allows CSC to use the products for current and future customers, clinched the deal, he added.
Sanjay Kumar, CA president and COO, explained that the two companies share a common base of customers who wanted CSC and CA to establish such a partnership.
Analysts agreed that the deal helps CA position itself as a service provider, not just a software developer, and gives CSC access to technology it can use in all its businesses as the company moves from the mainframe-centric to the competitive client/server, distributed computing marketplace.
CA will train CSC staff to resell the software products and will modify the packages to suit CSC's needs. The close alliance, however, did cause CSC some pause in the beginning.
Boykin acknowledged having some initial concerns over the agreement's effect on CSC's position as an independent hardware and software provider. Although Kumar did not require CSC to use CA software exclusively, he made the deal "so attractive to us that we would want to migrate to CA products," Boykin said.
Neither company would disclose financial details of the deal or revenue projections or savings stemming from the agreement.
For fiscal 1995, which ended March 31, CA generated $2.6
billion in revenues, which is
a 22 percent increase from the previous year, and earned $431.9 million in net income and $2.34 per share.
Although the financial results are preliminary, CA officials said the company's various client/
server products sold well. The Unicenter product line for managing Unix systems, they noted, played an instrumental role in CA's record results, bringing in as much as $300 million.
Highlights of CA's fiscal 1995 included the EDS deal. Under the 12-year license agreement, EDS can resell up to $100 million worth of the Unicenter product. The Texas-based integrator also can use all current and future CA products for itself and its existing and future customers worldwide. EDS also can standardize on certain CA packages at its information processing centers.
The EDS deal, said Michael Miller, senior vice president in CA's federal division, allowed CA to show its products to more federal agencies. He said he anticipates a similar result from the recent CSC agreement.
The intelligence community represents the leading user of CA's OpenIngres, Miller noted, but the database management software has lost to Oracle Corp. and Sybase Inc.'s competing products across federal agencies because they did not even consider OpenIngres. Through the CSC agreement, "federal customers now will look at it and give it a shot."
The bottom line, he explained, is the government will save because of the CA-CSC deal, and "for us, it means an opportunity to grow the product."
COMPUTER ASSOCIATES' FISCAL HIGHLIGHTS
(Preliminary 1995 results)
Earnings per share$3.49$2.34