In late 2000, Computer Associates (CA) changed its business model and the way it recognized revenue, ostensibly to better serve its stakeholders. The new subscription-based license model offered customers greater flexibility. Clients could subscribe to any CA software for any period of time, including month-to-month. With revenues recognized evenly over the life of the contracts, management hoped the new approach would help CA avoid the absolute last minute, end-of-quarter push to close deals. To help investors understand the change, management decided reported "pro forma" figures that restated CA's complete history as if the company had always been using subscription licenses. Skeptics questioned, however, whether CA was taking the lead in implementing innovative ways to support clients or just trying to conceal lackluster growth by restating prior performance under a new revenue recognition method.
Estimated Submission On |