Enronitis hits US software giant

CA makes software which powers corporate computer systems

Shares in US software giant Computer Associates have fallen steeply following media reports that the company is under investigation for overstating its profits.

Computer Associates has denied any knowledge of an official inquiry, but the firm's shares plunged more than 17% or $4.40 to close at $20.91 on Wednesday.

We have not been contacted by the authorities regarding any investigation and do not know what, if anything, is being investigated

Computer Associates statement

The stock price slump came after some US newspapers reported that federal prosecutors in New York had launched a preliminary enquiry into whether the company had exaggerated its profits.

Recent revelations over opaque book keeping at bankrupt energy giant Enron have made investors highly sensitive to reports of accounting irregularities.

Investigation surprise

Computer Associates said on Wednesday that it was unaware of any official inquiry.

"We have not been contacted by the authorities regarding any investigation and do not know what, if anything, is being investigated," the company said in a statement.

" If there are questions, we look forward to being contacted and to having the opportunity to defend against hearsay and what we believe will prove to be unwarranted concerns."

In April last year, Computer Associates' shares tumbled following initial media reports that a change in the company's business model and new accounting practices might be masking its true financial position.

Pro-forma accounts

In October 2000, Computer Associates began reporting its results on a 'pro forma' basis - an accounting method which allows companies to strip out one-off costs and make other adjustments aimed at providing a snapshot of their underlying performance.

Computer Associates said the pro-forma figures would help investors to assess its performance following a change in its business model.

In keeping with US stock market rules, Computer Associates also reports its results in accordance with standard accounting principles.

Under standard accounting rules, the company's losses for the three months to December narrowed to $275m (£168m) from $468m during the same period one year earlier.

Computer Associates, founded in 1976, makes software used by major corporations to run their computer systems. With about 17,000 employees, it is the world's fourth biggest software manufacturer.