Computer Associates' Shortfall Gives It Credibility of a Wet Pack of Firecrackers
Computer Associates International taught investors an old, but important lesson yesterday: Fourth of July firecrackers are best enjoyed when you are not holding them when they explode.</br></br>The mainframe software firm lighted a fuse when it reported very late Monday night, actually just before midnight on July 4, that it would miss analysts' estimates for its fiscal first quarter ended June 30. It didn't provide full details in the late Monday announcement.</br></br>This wasn't your ordinary, miss-the-estimates-by-a-penny-type announcement. Instead of earning the 55 cents that analysts expected, the Islandia, N.Y., company anticipated earnings of 11 to 16 cents, it later disclosed in a conference call yesterday morning.</br></br>When the post-holiday markets finally opened, investors couldn't drop the stock fast enough. It plunged 43% to $29.375, down $21.75, in heavy 4 p.m. New York Stock Exchange composite trading -- the largest percentage decliner on the Big Board.</br></br>Wall Street was fuming. Indeed, the market carnage underscores the sensitive issue of trust between a company and Wall Street investors. Credibility can get a company through a rough patch, keeping investors from bailing out, limiting the damage to a stock price on bad news, and buying senior executives time from boards that look to the stock price as a report card for management. All that is blown when a company throws the Street a nasty curve.