CA is also working to fortify its product line and integrate the companies it has acquired recently. In the past two years, CA has spent $1.2 billion to snap up eight software businesses, including Netegrity; iLumin, a storage-management software company; Niku, an IT-management software company; and Concord Communications, which makes network-monitoring products.

In November, CA introduced a new version of Unicenter, its popular suite of integrated software modules, a move that the company hopes will help propel growth. For the six months ended September 30, 2005, CA's revenues increased 8 percent, to $1.8 billion, though $73 million was due to currency gains and its two most recent acquisitions. Net income was $135 million, compared with a $51 million loss in the six-month period last year.

Despite the strong results at CA, many industry analysts are reserving judgment. Some are concerned about a slowdown in the market for mainframe software, CA's primary market. Others are concerned that the product line is dated and lacks true innovation. "It's wait-and-see," says Kim Caughey, an equity analyst covering software companies for Fort Pitt Capital Group, in Pittsburgh, which holds a stake worth $11.5 million in CA.

Davis, however, takes such skepticism as a spur to put the overhaul into overdrive. In fact, he says the most stressful part of the job for him is "making sure the urgent doesn't drive out the important," such as his long-term goal of creating a training, mentoring, and development program for his finance staff similar to the popular ones at Dell, Cargill, and GE. "When someone graduates from college, I want CA to be on their short list for employment," says Davis. And so long as the candidates don't have the travel nightmares Davis faced on his first trip to CA, he's confident he can win them over. "We may be hitting on only three or four of six cylinders right now," he says, "but we're starting to move things in the right direction."

Alix Nyberg Stuart is senior writer at CFO.

Test Case for DPAs

CA was one of the first companies to be allowed to restructure under a deferred-prosecution agreement (DPA). Since CA's DPA in 2004, about a dozen more companies have cut similar deals, including the accounting firm KPMG and insurance giant American International Group Inc. Under a DPA, the feds achieve a kind of coerced cooperation. To avoid prosecution, companies admit wrongdoing, promise reform, and help prosecutors convict the insiders responsible for the illegal activity. As one of the first to negotiate a DPA, CA is being watched closely by the financial and legal communities.

DPAs could "achieve a host of beneficial results — admission of guilt, restitution for victims, a disciplined process of internal reform — without causing the adverse consequences that come along with a full prosecution and conviction," says David Pitofsky. Pitofsky was the lead federal prosecutor who helped broker the deal with CA, and is now a partner in the New York office of law firm Goodwin Procter LLP. "The consequences of failing are horrific for a company," says Pitofsky. "They'll move heaven and earth to fix problems" reported by the independent examiner. For CA, the stakes are high because it is one of the most prominent companies to negotiate such a deal. Federal regulators will use the company as a test of the DPA's effectiveness. — A.N.S.

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