Hard times for systems management suppliers

It was a gloomy financial quarter for most systems management software suppliers, although a few bucked the overall downward trend.

Computer Associates (CA) was one of the exceptions that managed to record growth. For its first quarter of 2002, ending June 2002, the company's revenues climbed a solid 7% to $765 million.

But there are some one-off influences on that growth. Since late 2000, CA has been encouraging customers to buy software on a subscription basis. And in this latest quarter subscription-based revenues more than doubled from $140 million to $314 million, while traditional licence fees fell back to $95 million.

CA CEO Sanjay Kumar maintains that the company's results reflect the popularity of that new model: "Our business model enables customers to make shorter-term commitments and to pay for what they use, not what they expect to use."

As a result, CA's average contract length was cut to 2.75 years from 4.0 in the year-ago quarter. However, some analysts suggest that the switch to subscriptions obscures the 'true' underlying growth rate and that any effects of this will not be apparent for several years – if at all.

Alongside security, enterprise management and portal products, one of the key areas of focus for CA has been storage management. But in that segment it is up against some stiff competition, particularly from storage software market leader Veritas.

Veritas' latest financial results, however, were disappointing, with revenues slipping 7% to $365 million, compared to the same period in 2002. But investors were cheered by Veritas' net income figure of $26 million, up from a net loss of -$129 million in the year-ago quarter. They also paid homage to Veritas' cash mountain of $2 billion.

To help boost opportunities, Veritas has extended the reach of its software management software to the IBM AIX server environments and has added further support for the Linux operating system.


Systems management technology vendors
Company   Description   Period   Period end   Revenue ($m)   Rev change   Net inc ($m)   Prev net inc ($m)  
Computer Associates Intl Inc Systems &security mgmt s/w 1Q03 30-Jun 765.0 7% -65.0 -342.0
Compuware Corp Prog tools, sys mgmt &srvcs 1Q03 30-Jun 346.6 -23% 22.5 34.4
Embarcadero Tech Inc Database design &mgmt s/w 2Q02 30-Jun 11.9 -15% -0.1 0.6
Mercury Interactive Corp Applications performance s/w 2Q02 30-Jun 94.0 -2% 18.0 9.3
Veritas Software Corp Storage management s/w 2Q02 30-Jun 364.7 -7% 26.0 -129.0
All currencies converted into $US at exchange rates for the financial period

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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