SAN FRANCISCO -- Even though Computer Associates (CA) - Get Report spent half of its presentation at the NationsBanc Montgomery Tech Week conference hyping its software that manages computer networks, fund managers were still concerned about the company's troubles in its mainframe business.
Computer Associates saw its mainframe-software revenue drop 8% in the latest quarter ended Dec. 31 from the year-ago figure. "Total revenue increased 10%, but we continue to see softness in the mainframe sector," said Doug Robinson, an investor relations official at CA.
Robinson said CA's client-server business is picking up, growing 31% year on year, and that operating margins will stay in the mid-40% range. The company is looking to boost revenue from its Unicenter line of networking software and from acquisitions of small to midsize service companies, he said.
All of that sounds great, money managers said after the session. But that nagging slowdown in the mainframe business is keeping some of them at bay. "They'll really have to grow the other businesses to make up for the losses in mainframes," said one fund manager.
Visual Networks Gets Noticed
One problem with this Montgomery conference: Some of the companies are so big that the new stories could easily be overlooked, especially the companies with new ideas, the first comers with no competition.
is one such company.
"As long as we've been public, I've been saying this," said Scott Stouffer, Visual Networks' CEO. "I continue to stand here and say we have no direct competition. We do not feel like we're out there fighting in a competitive market at all."
Visual Networks makes a software product that resides at the intersections of telephone networks. It's kind of like a traffic helicopter at every corner of a network: It lets phone companies know exactly where problems occur on their networks.
The buzz is growing around Visual Networks. Its presentation at the
American Electronics Association
conference last November was packed, but to the more mainstream managers at Monty's conference, this was all new. Too bad, because they've missed a 34% rally in this stock over the past 10 weeks.
Visual's Stouffer is a welcome change from the typical gray-suited, white-shirted CEOs who typify the presenters at these conferences. As Stouffer stands at the podium, you get the sense he's the kind of guy who has worked a late night or two. No pencil-necked geek, Stouffer is a goateed thirtysomething, built more like a rugby player than an Internet dweeb and dressed in an open denim shirt bearing the Visual Networks logo.
He displayed a financial table showing gross margins growing from 56% in the first quarter of the 1998 to 65% by the end of the year, comfortably within the company's goal of a 62% to 66% range. "It's starting to feel like we're going to be on the high end of that range," said Stouffer. "We might be a little conservative in our view of gross margins."
Intel, ADI Stay Mum
Money managers who packed the largest conference room at the Montgomery conference yesterday to hear the latest news from
walked away with no real news. Instead, they had to learn through
The Wall Street Journal
this morning that Intel is forming an alliance with
to enter the booming market for digital signal processors -- a type of communications chip.
NationsBanc Montgomery Research Director Tom Thornhill opened a presentation by ADI this morning by informing the several hundred money managers that they would learn nothing about the reported venture at ADI's talk. Instead, if they wanted information, they would have to dial in on a conference call later that day and, to get the phone number, they would have to call Intel headquarters.