CA slides as gloomy outlook, competition worries weigh

Stock Market Predictions

(Global Markets) - Shares of CA Inc (CA.O) plunged 11 percent on Friday, a day after the business software maker forecast a slow 2012, raising concerns that rising competition in its key mainframe business may hurt growth.

CA, which makes software to power large computers, posted a fourth-quarter profit and revenue missed Wall Street estimates, hurt by a 9 percent dip in international bookings.

CA's rival BMC Software Inc (BMC.O) forecast a strong fiscal 2012 earlier this month, boosted by solid bookings.

Brokerage Raymond James, which downgraded its rating on CA's stock to market perform, said a disappointing fiscal 2011 made it unlikely that 2012 would be a turnaround year.

"The hoped-for acceleration (is) not in sight," it said in a research note to clients.

"FY12 guidance signaled no meaningful top-line acceleration, declining margins, and tepid cash flow gains."

Weakness at its Europe, Middle East and Africa markets continued to hurt renewal of contracts and the company expects the softness to continue into fiscal 2012.

The company, which competes with Symantec (SYMC.O) and Intel-owned (INTC.O) McAfee in Web security, will sell the unit to venture capital firm Updata Partners of Edison.

Analysts viewed this as a positive that will help the company focus on its core business.

Brokerage RBC Capital Markets expects more M&A activity and said CA may hive off some businesses or buy some new technologies.

CA has a kitty of $300-$500 million earmarked for acquisitions in fiscal 2012.

RBC cut its price target on CA's stock to $28 from $30, but maintained its outperform rating.

Shares of the Islandia, New York-based company were down 10 percent at $22.55 in midday trade on Nasdaq. More than 8 million shares had traded hands by 1 p.m. ET -- two times normal volumes.

(Reporting by Abhiram Nandakumar and Sayantani Ghosh in Bangalore; Editing by Don Sebastian)