introduced a new revenue recognition policy that the company said will offer clients flexibility while improving both the visibility of the business software provider's revenue stream and quarter-to-quarter revenue predictability.
Though the new business model will cause CA to alter the way the company recognizes revenue, it won't necessarily change the overall cash generated from operations. The company said the new model will eliminate the back-end loaded nature of its business, where most license agreements are concluded in the final days of a quarter.
Clients will now have the option of subscribing to CA software, instead of licensing specific products in predetermined quantities, and the company will account for contracted revenue over the life of the license term.
In recent months, Computer Associates has lost some credibility on Wall Street as the company preannounced a series of profit shortfalls and suffered through a maligned executive stock compensation plan that forced the company to return hundreds of millions of dollars to shareholders. Yesterday, the company reported second-quarter earnings that fell to 54 cents a share from 75 cents a year ago, but still beat analysts' estimates for the period.
Clients will now be able to determine the length and dollar value of a software license and vary the software mix, and the new contracts will have a simpler and shorter license agreement. Previously, Computer Associates allowed clients to license software that could run across an unlimited number of processors and locations, up to a maximum license capacity.