CA Inc. (CA)
August 03, 2011 10:00 am ET
William McCracken - Chief Executive Officer, Director and Member of Compliance & Risk Committee
Arthur Weinbach - Non-Executive Chairman, Member of M&A Committee, Member of Compensation & Human Resource Committee and Member of Audit Committee
Clifford DuPree - Senior Vice President of Corporate Governance and Corporate Secretary
Ladies and gentlemen, please welcome the Chairman of the Board, Arthur F. Weinbach.
Good morning. I'm Art Weinbach. I'm Chairman of the Board of CA Technologies, and it really is my pleasure to welcome you to CA Technologies 29th Annual Meeting of Stockholders and to the company's global headquarters here in Islandia. Before we begin the business of the day, let me tell you what we have planned for this morning. First, I'm going to introduce your Board of Directors and the CA Technologies executive management team. I'll then ask our Corporate Secretary, Cliff DuPree, to conduct the business section of the meeting. Bill McCracken, who's sitting here, your CEO, will recap what we did during the last fiscal year and look into the fiscal year we're in right now and talk a little bit about where we're going in the future. And finally, we'll open up the microphones to a shareholder forum where you can ask us questions, and hopefully we'll even be able to respond to some of them.
So let me begin by introducing the members of the CA Technologies board. And please as I call your name, stand so that people can see who you are. First, our newest board member is Rohit Kapoor. Rohit is President and CEO of VXL Service Holdings, a provider of outsourcing and transformation services since 2008. Ray Bromark retired from PriceWaterhouseCoopers after 39 years, where he was a partner and head of PWC's professional risk and quality group. Gary Fernandes is Chairman of FLF Investments, a family-run commercial real estate business. He retired from EVS Corporation as Vice Chairman in 1998 as a very young man after nearly 30 years with the company. Kay Koplovitz. Kay is Chairman and CEO of Koplovitz and Co., a media advisory and investment firm. Since 2007, she's also been Chairman of the Board of Liz Claiborne. Kay is also the founder of USA Network and served as its Chairman and CEO from 1977 to 1998. Chris Lofgren is President and Chief Executive Officer of Schneider National, a multinational trucking company and provider of transportation logistics and related services. Rich Sulpizio, President and CEO of QUALCOMM Enterprises Services, which is a division of QUALCOMM. He also previously served as President and COO of QUALCOMM. Laura Unger is a former commissioner of the SEC. She now serves as a special advisor to Promontory Financial Group, a financial services consulting firm. Reni Zambonini is the former Chairman and CEO of Cognos, a developer of business intelligence software. And of course, Bill McCracken, who you we will be hearing from shortly, is Chief Executive Officer of CA Technologies. Before becoming CEO, Bill was the company's nonexecutive Chairman and also served as interim Executive Chairman. He spent 36 years at IBM in a variety of executive roles.
Now I'd like to spend a moment introducing members of the CA Technologies management team. We have Russ Artzt, who's the Vice Chairman and founder; Rich Beckert, recently promoted to Executive Vice President and Chief Financial Officer; David Dobson, Executive Vice President and Group Executive of the Customer Solutions Group; George Fischer, Executive Vice President and Group Executive of Worldwide Sales and Operations; Amy Olli, Executive Vice President and General Counsel; Peter Griffiths, our most recent addition, Executive Vice President, Technology and Development; Phil Harrington, Executive Vice President, Risk and Chief Administrative Officer; Bill Hughes, Chief Communications Officer; and Jacob Lamm, Executive Vice President, Strategy and Corporate Development.
I want to thank everyone for taking the time to come to CA Technologies this morning and to be with us now. I'll now turn the podium over to Cliff DuPree, who will run the business section of the meeting.
Thank you, Art, and good morning. Before we proceed with the voting, I'd like to take care of a few administrative details. First I'd like to introduce Peter Descovich, from Broadridge Financial Solutions. Mr. Descovich has been appointed as the inspector of election for this meeting. Peter? Back there. Second, I can confirm that I have received Broadridge's affidavit as proof that due notice of the meeting has been given to the holders of our common stock on the record date. Notice was given starting on June 20, 2011. And last, I can also confirm that a certified list of the holders of our common stock as of the close of business on the record date is available for inspection by stockholders at the inspector of elections table. This list was prepared and certified by BNY Mellon Shareholder Services as the transfer agent registrar for our common stock. If any stockholder has a ballot or proxy card that you haven't turned in yet, please give it to one of our attendants so that we can accurately determine on the quorum.
Thank you. I am now able to report that the holders of at least a majority of the outstanding shares of our common stock are present in person or by proxy at this meeting. Since a quorum is present, this meeting is properly constituted for the transaction of business.
Now let me describe the procedures for the meeting. The business of this meeting consists of voting on the 6 proposals described in the company's proxy statement. To help us conduct an orderly meeting, we ask that you observe the rules contained in the printed program that was handed out at the registration desk.
Now to the proposals. Proposal 1 is the election of directors. The board of directors has nominated the 10 individuals listed in our proxy statement. The nominees were introduced earlier and they are Ray Bromark, Gary Fernandes, Rohit Kapoor, Kay Koplovitz, Kris Lofgren, Bill McCracken, Rich Sulpizio, Laura Unger, Art Weinbach and Ron Zambonini. I declared that these individuals have been duly nominated. The company has not received due notice of any other nominees and I declare the nominations closed.
Proposal 2 is the ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal 2012.
Proposal 3 is an advisory vote on compensation of our named executive officers.
Proposal 4 is an advisory vote on the frequency of the advisory vote on the compensation of our named executive officers.
Proposal 5 is the approval of the CA, Inc. 2011 Incentive Plan, and Proposal 6 is the approval of the CA, Inc. 2012 employee stock purchase plan.
Now are there any questions on any of these proposals? If you have a question that doesn't relate to one of these proposals, please wait until the general question-and-answer period later in the meeting.
Okay. We will now open the polls for the election of each of the 10 directors of the company and the polls are also open on proposals 2 through 6. Any stockholder who would like to have a ballot or wishes to deliver a proxy card to the inspector, please raise your hand.
As a reminder, if you had previously voted by proxy, there's no need to submit a ballot unless you wish to change your vote. Attendants, could you please collect the ballots? We have one ballot to be collected. We'll wait a moment. Have all the ballots been collected? Great. Thank you. It is now 10:10 and I declare the polls closed.
The inspector of election has provided his preliminary report on the voting. Based on these preliminary votes, I am now able to announce that each of the company's 10 nominees have been elected as a director of the company. Each of the directors received between approximately 88% to 91% of the votes cast. The selection of KPMG as the company's independent registered public accountants for fiscal 2012 has been approved. Approximately 91% of the votes cast at the meeting and entitled to vote on this item were voted for this item. The advisory vote on the compensation of our named executive officers has been approved. Approximately 87% of the votes cast at the meeting and entitled to vote on this item were voted for this item. The advisory vote on how frequently our stockholders should vote on compensation of our named executive officers has approved an annual vote. Approximately 92% of the votes cast at the meeting and entitled to vote on this item were voted for this annual vote. The CA, Inc. 2011 Incentive Plan has been approved. Approximately 82% of the votes cast at the meeting and entitled to vote on this item were voted for this item. And the CA, Inc. 2012 Employee Stock purchase plan has been approved. Approximately 98% of the votes cast at the meeting and entitled to vote on this item were voted for this item.
That concludes the business portion of our meeting, and I'll turn the podium back over to Art.
Thank you, Cliff. Brilliantly done, as usual. It's now my pleasure to ask Bill McCracken to come up and to talk to you for a few minutes about CA Technologies, about the business of CA Technologies. And as I said earlier, after Bill completes his remarks, we'll have time for a shareholder forum where you can ask questions and hopefully we'll get an opportunity to respond. But we're very fortunate to have someone with Bill's experience, his knowledge, his drive and his incredible work ethic as a CEO, and it really is my pleasure to ask him to come up and share some remarks with you.
Well, good morning and welcome. We appreciate you being here and taking some time with us today and also for your support. And I would like to take a few minutes if I can and talk to you a little bit about last year and some of the things that we dealt with as we went through the year, look forward into the current year, as we have one quarter behind us and some of the things we're working on to do with this company and how we're repositioning ourselves in the industry.
Last year was an important year. It was the first full year of our working on the strategy that we declared about 18 months ago. A strategy where we said we wanted to become a thought and a technology leader on driving virtualization, driving cloud implementation and driving SaaS applications. The new technology that we believed that was going to emerge in the marketplace has become a key driver in what drives IT and how businesses change the way they do business and how they compete with one another. And at that time, there were a lot of questions yet being asked about is this real? Is it going to happen? Are you betting on the right thing? And as we have moved through now about 18 months of that strategy, the voting is clearly in. We chose the right strategy. In fact, the industry estimates were wrong. They're low. The market has expanded more rapidly than we thought it would. Companies are implementing those changes more quickly than we thought they would and the drive to get that done is increasing as well, too. And as we've talked in the last couple of weeks, both with industry analysts and then financial analysts last week, we've talked about the estimates for this year as well. We think the industry estimates are wrong again. We think they're low because, in fact, the path we chose and where we're starting to emerge as an industry leader is in fact what's driving the marketplace.
Although this last year was an important year for us as well, too, because we put together what I believe is, in our industry, the best senior team in the industry; young, talented, skilled and experienced that brings varied experience from many backgrounds and many experiences with respect to the industry and companies that they worked in that brings particular skills to each of the positions that they're in. So it has been an important transition year for us for that as well, too, and that team is in place and as Art mentioned a while ago. Our newest members Peter Griffiths who joined us in the technology side to take advantage of the great capability we have in this company from a technology point of view.
We're building for the future as well, and when we declared our strategy of driving our virtualization cloud and SaaS, we also said there are a few other things we wanted to do, and that is we wanted to grow aggressively in the growth geographies, like Asia Pacific and Latin America. We've been on a little over 2-year trek in Latin America to enhance and increase our business there and clearly, we've gotten a return on that investment. And for the last year and the last quarter, the performance we've had there has exceeded even our estimates of what would happen in that marketplace. We moved aggressively back into the Asia Pacific marketplace, a fast-growing part of business for every business and every technology, and we have built the team there, and that is now getting also enormous benefits from what we're doing.
As an example, just 2 weeks ago, they decided to have a customer and an industry forum where they hoped that they would get 500 attendees, and they had over 1,400 attendees. So clearly, the things that we're talking about and talking with them about are things that they're interested in talking about as well. We made in the last year, as you saw on one of intro charts, a series of acquisitions to combine technology that we acquired that is unique in the marketplace with the technology that we build in the marketplace from our own resources that we have around the world and have been delivering those solutions into the marketplace as we've moved through the year. One of the clear challenges we had and want to continue with is how rapidly we can deliver those solutions into the marketplace. And I think in today's world, in today's environment, especially the technology industry, the speed and the cycle time and how quickly you're able to respond in the marketplace is an important part of what we do.
One of the acquisitions we made was the company called Nimsoft. It was important to us for 2 reasons. One, it had very significant technology that we could deliver to the marketplace and that helped manage in the marketplace. But as important, it had a delivery capability to deliver through what are called MSPs, managed service providers, that market to customers where they take what we have, add some additional function to that and deliver it into the marketplace. And that has allowed us to move out the new geographies that I described. It also has allowed us to move out what we call mid-market accounts. This company in the past has largely done its business in what we call the global 2000. A lot of the change that is going on in business around the world today, though, happens in the mid-marketplace. A lot of companies that are small changed the business model that significantly changes it for large companies as well, too. So we wanted to take our products to that mid-market area, and Nimsoft alone has added over 450 new logos as we went through last year. And so it's a new marketplace for us, but new customers for us as well.
Probably one of the key things that we did as we went through last year, too, was to divest some of the businesses that we believe weren't core to our business. Important things; things that we did in the past that we didn't think they lined up as well with where we're going in the future as they needed to. And so I divested 2 things: governance and what we called ISBU, which is the threat business that is generally on personal computers, important part of business now core to what we do. As we've moved into this year, we're also disinvesting in less productive parts of our business to hone our operations, to make them clearly designed to do what we decided to do from our strategy point of view and to ensure that we have our resources applied where it's useful and meaningful to this corporation.
There was a report that came out from Gartner several months ago about what they called ITOM, IT operations management. That article described the entire management area that we're a part of. But most important to us, it talked about the changes in the marketplace. One of the things it called to position was in fact there are a lot of new entries into the marketplace, competitive for us. Many small competitors that had talked about what they call the big 4: IBM, HP, BMC and ourselves. The industry grew on the parts that they surveyed last year, 7.3% -- 7.1%. We grew 11.3%; the only one of the big 4 that gained share last year in that management marketplace. Probably more importantly, we grew 3x the rate of IBM and 2x the rate of BMC, so some of the products we're reintroducing into the marketplace clearly are what our customers are looking for. From a financial performance point of view last year, we grew faster than we've grown in over a half a decade. We grew at 5% on the revenue side. We held our margin at 34% while we invested heavily in the things that I described to you a minute ago. Our earnings per share was up 13% for the year and our cash flow from operations was up 3%. So we put together a solid year.
What are some of the things we're focused clearly on as we move into this year? Clearly, and you may have heard if you've read some of our announcements on the quarterly earnings calls and/or if you've listened to the earnings calls, one of our focus areas for the last year has been EMEA, where we had what we believe to be less than the kind of performance we've wanted out of that, and we've made significant changes there, the most recent of which is the executive that will be in charge of that reports to George in executive change. We've put additional resource in there. We have changed the incentive plans and we are reintroducing our new products into that area as well, too, and we believe that the changes that have been made there will bring EMEA back into the performance area that we wanted to have it this year. It is clearly one of our focus areas for the year. We want to continue to grow in AP. We're off to a good start and we want to continue that growth as we go through the year and Latin America has, as I said, grown even more rapidly than we projected and we believe we can continue that because the marketplace in Latin America, and it's true for both Latin America and Asia-Pacific and it's something that often happens in what we call growth geographies is that the initial adoption of new technologies often happens in those geographies, and it does because they actually skip a technology.
I can recall being in India back in the early '90s, I guess it was, when we were talking about communications. And at that time, they had a very poor infrastructure of landlines from a communications point of view. They were talking about skipping and going straight to cell phone technology. They did. Today, there's 1.2 billion people in India and there's 2.4 billion cell phones. So they've adopted the new technology even more rapidly than North America has.
I think as we move through this year, the key challenge for us is to demonstrate to the marketplace we can continue to consistently execute in this strategy and the things we do. One of the things I said for many years is companies, while a strategy is important, and I think our choice of the strategy is important, they don't usually fail because they don't have a strategy. They fail because they don't execute their strategy. So this team and this company is focused on doing what it is we set out to do. If we look at this year, we've told the marketplace we think we're well between 6% and 8% on the revenue side. Again, ahead of where we were last year. We plan to hold our margin at 34% because again, we're investing heavily in the future. We think we can grow earnings per share between 6% and 10%, and we can grow our cash flow from operations between 3% and 5%. So we're beginning to emerge as a leader in the marketplace, but we think as we work through this year, we will clearly take that position. And I think the indications are that we're starting to move into that part of the marketplace.
And then I think the biggest and most important thing for us is to demonstrate to the marketplace that we now have a second year of 4 quarters of consistent performance. And I think if we do, we'll begin to get rewarded for that because that is clearly one of our goals, it's one of our goals for you is to get the return on the investment that you've made in us. And I believe as we move through this year, we will have the strength of consistent performances that should demonstrate to the marketplace, we deserve that investment.
And let me just wrap up with one thing; and that is this year is our 35th year, and it's an important milestone year for us. And we've talked about that internally a lot because it matters to us a lot because this company's been through a lot of transitions that we believe it's on the rise now, and the actions that I was talking to you about I think are designed to ensure the next 35 years. We're building for the future. We invested significantly last year, we're investing significantly again this year and we believe those things will pay off.
Thank you again for being here and I think now, Art, we'll take questions?
Okay, so it's now time for what we call a shareholder forum. It's an opportunity for you to ask questions. I see there's a microphone here, and there are also movable microphones. So if anyone has a question, if you either come to the front or wave your hands, we'll be able to get a microphone to you to give you an opportunity. I was very impressed with Bill's comments also, so I mean...
I certainly appreciate that degree of support.
I have a way of doing it.
Well if there are no questions, I again really want to tell you how much I appreciate your coming. We treat, obviously, these events very, very seriously, and you're very, very important to us. All of our shareholders are very important to us. So I want to thank you. And Bill, you're going to be...
Yes. If we move here, we had one other thing that we wanted you to take a look at with us. We think that one of the good hallmarks of a class company is not only what we do with respect to the business we're in, but also the way we give back and what we give back, especially to the community. And that has been true, especially for CA for now a long time on Long Island, but beyond Long Island as well, too. That even expands overseas into India and other places, where we try to give back through education and through children in what we do. So take a look at this video.
Ladies and gentlemen, this concludes the 2011 CA Technologies Stockholders' Meeting.