Flash storage solutions provider CA Inc. (CA) has reached an agreement with Marlin Equity Partners (Marlin) to divest its arcserve data protection business for an undisclosed amount. The deal will allow CA management to focus better on the core business, thereby improving execution.
Other terms and conditions of the deal were also not disclosed. However, it is expected to close in second-quarter 2015. Further, on completion of the deal, the arcserve data protection business will form a part of CA’s discontinued operations. As a result of the announcement, CA restated its fiscal 2015 guidance in an 8K filing and also mentioned that it will not be materially impacted by this transaction.
For fiscal 2015, the company expects total revenue to decline in the range of 2.0% to 1.0% to $4.43 to $4.49 billion in constant currency. CA expects non-GAAP earnings per share from continuing operations to decrease in the range of 21–19% to $2.45–$2.52 in constant currency. The company also expects cash flow from operations to increase in a range of 5% to 12% to $1.06 to $1.13 billion in constant currency.
CA arcserve data protection portfolio is an easy-to-use solution providing cost-effective backup to manage and monitor network, physical and virtual servers, thereby helping businesses to boost the availability of critical systems.
The divesture may seem appropriate as a part of the company’s growth plan, which is focused on eliminating non-core assets and investing in core areas of the business, from which it derives most of its revenues. Moreover, these initiatives are expected to yield results in fiscal 2015 and provide the company with adequate growth opportunities in the long run.
It is worth mentioning that CA has almost completed its restructuring initiative — ‘Fiscal 2014 Plan.’ Per the plan, the company has nearly completed the layoff of 1,800 employees and consolidated several facilities into development hubs. A leaner cost structure will help the company to improve its profitability.
We believe that the breadth of CA’s products and increased efficiency offered by them will help attract customers across sectors, lending stability to the business model. We are also positive about CA’s increased cloud exposure. A decent renewal rate, modest cash position and share repurchase also appear encouraging.
On the other hand, increasing competition from IBM (IBM), Oracle (ORCL) and Hewlett Packard (HPQ) and exposure to Europe remain the near-term headwinds.
CA currently has a Zacks Rank #3 (Hold).
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