Updated from 4:51 PM ET

Embattled software giant

Computer Associates

(CA) - Get CA, Inc. Report

rebuked its critics -- and the weak economy -- Monday when it reported strong quarterly results and raised its earnings guidance for the current period.

The world's No. 3 independent software company, which has been bogged down in an ugly proxy fight with Texas billionaire Sam Wyly, said on a pro forma operating basis that it earned $323 million, or 55 cents per share, on $1.44 billion in revenue during its fiscal first quarter. Analysts were expecting earnings of 48 cents per share on revenue of $1.44 billion, according to Multex.com.

On a conference call with Wall Street analysts following the release of the news, the company then said that fiscal second quarter earnings would be 4 cents higher per share than expected. Analysts had projected earnings of 49 cents per share for the company's second quarter.

However, faced with the bleak outlook for technology spending, the company stopped short of pounding the table about its prospects, and actually took down slightly its revenue projections for its second quarter to $1.45 billion, vs. the $1.46 billion analysts were expecting, according to Multex. And it cautioned analysts that fiscal third and fourth quarter earnings numbers should stay in place.

"We strongly encourage and recommend folks to leave Q3 and Q4 numbers alone," CEO Sanjay Kumar told analysts. In all, he projected earnings of $2.12 for the company's full 2002 fiscal year, which concludes next March. Analysts currently expect the company to have pro forma earnings of $2.00 per share, according to Thomson Financial/First Call.

A year ago, on a pro forma operating basis, the company earned 33 cents per share on $1.32 billion in revenue. CA's pro forma results restate past numbers to reflect the company's new business model, which it initiated last October. Under the model, the company recognizes revenue from software sales over the life of its contracts.

On an as-reported basis -- which conforms with generally accepted accounting principles -- CA lost 24 cents per share, excluding certain items, on revenue of $713 million. That compares with earnings of 14 cents per share on $1.14 billion in revenue a year ago, under that reporting structure.

The company has faced

skepticism because of the change in how it reports its numbers. Some observers have charged it is trying to hide slowing growth, an allegation the company has denied.

On the company's conference call, Kumar said the effects of the new business model are beginning to show, even though economic conditions are challenging.

"Q1 offers resounding proof that the new business model is very good for us," Kumar said. "But I should point out that it wasn't all roses. It was a very difficult environment. Spending was tight in the U.S. and Europe was mixed."

After closing down 41 cents, or 1.2% at $33.11 in regular trading, the stock traded up after hours at $33.42 on

Instinet

.

In June, Wyly, a co-founder of investment firm

Ranger Governance

and a minority investor in CA, launched a proxy fight against Chairman Charles Wang and Kumar. He's trying to replace CA's current board with one of his own choosing, and has proposed breaking the company up into different units. A proxy vote is set for Aug. 29. The company has denounced the initiative, and analysts have been

skeptical of Wyly's chances of success.

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On the conference call, Kumar was brief with his comments on the tussle -- and Wyly's initiatives.

"I believe his plans and management team are unsound for the company," Kumar said. "We have met with large institutional shareholders, communicated our message, and our biggest single focus now is the business. Which, I believe in the end, will prove Mr. Wyly wrong."

Wyly wasted no time in picking apart CA's results. On its call, CA said the "residual value" form contracts signed last quarter, or its deferred revenue, amounted to $502 million, vs. previous guidance of $600 million to $700 million. In a press release issued shortly after CA's call, Wyly pounced.

"We believe this represents a major shortfall in a significant metric that is not pro forma," his firm, Ranger, said in the release. "Once an investor puzzles through CA's 'pro forma' reporting, we believe it's clear that performance, as defined by new contract signings, can only be described as 'anemic.'"

Even before Wyly's criticism of the metric, analysts questioned Kumar about the discrepancy. Kumar admitted that the company's deal size was getting smaller, but only because CA had been successful in shortening the average length of the contracts it signs from 5 1/2 years to four.

While shorter contracts result in smaller deal sizes, the average monthly value of those contracts goes up, Kumar says.

"The reason you want to bring it down is the quality of the business, in terms of what you have to discount, et cetera, improves," Kumar said in an interview with

TheStreet.com

. "The longer the life of the deal, the longer the approval cycle and the bigger discount you have to give."

Instead of pointing out a weakness in CA's results, Kumar said Wyly "got it exactly backwards." He said his company's broad software portfolio -- CA sells more than 700 different products -- helped it perform in difficult times, much as

IBM

(IBM) - Get International Business Machines (IBM) Report

and

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

are benefiting from their broad offerings. While CA's stock has lagged its software peers over the last five years, it's up 76% this year.

Drew Brosseau, an analyst with

SG Cowen

, said CA's results show the company is on track.

"I was pretty pleased with the quarter," says Brosseau, who rates CA a strong buy. "Obviously, the proxy issue is one that they're going to have to wrestle with over the next month or so, but I think it's safe to assume they're going to do what they can to keep the business doing well." (His firm hasn't done underwriting for CA.)

Kumar, for his part, said he'll be around for the company's next conference call -- if investors want him to be.

"I would never be so arrogant as to predict that kind of thing," Kumar said. "But I think we've done well this year in an absolutely terrible market. I think investors will vote on that record."