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Charles Wang and three associates founded Computer Associates International Inc. 25 years ago. Now, after helping build CA into one of the largest independent software companies in the world, Wang is in for the fight of his life. The adversary is Texas billionaire and CA minority shareholder Sam Wyly, who, along with his investment firm, Ranger Governance Ltd. of Dallas, is waging an all-out proxy war to take over the Islandia, N.Y., company. Wyly wants to replace Wang, president and CEO Sanjay Kumar and the rest of CA’s board with his own group of executives. Wyly has blasted CA’s customer service record and lambasted management for everything from the company’s past accounting problems to its current financial slump. CA has fired back with a lawsuit, among other broadsides, saying Wyly violated a noncompetition clause signed when he sold Sterling Software to CA last year. Wang, at the company’s annual trade show at the Orange County Convention Center in Orlando, Fla., spoke to The Daily Deal about the governance struggle. The Daily Deal: Why is Computer Associates’ existing board more qualified to run the company than Sam Wyly’s proposed board, which includes a number of business world luminaries? Charles Wang: Because I don’t think anyone there has run a software company of this dimension. None of them are recognized as software industry spokespeople in any way. We understand the business, we understand our industry, we understand the technology that goes with it. On our board of directors, three of them are insiders, and seven are totally independent people. Mr. Wyly’s board, as you start to trace through it becomes like a spider web of connections of how they come together. So I think we have the true independent board — one that has guided the company up to this growth point now and one that can take the company even further. DD: You’ve disparaged Wyly’s plan to split CA into four separate units as a bad idea. Why? Wang: It won’t work. It’s as simple as that. He sold Sterling [Software] to CA because he recognized they have to be part of something bigger. Customers are telling us over and over again, “We want to have one vendor. We want to have integration between all the pieces you offer.” Every time we have acquired a company, the first thing they say is, “How long do I have to wait so I don’t have to speak to both of your salespeople?” If you split the company apart, it means there will be four salespeople calling on this customer, four different bureaucracies, four different development groups. DD: There has been much speculation on Wyly’s real motives for launching the proxy fight. What’s your take? Wang: I don’t know, and I’m not the one to go and [figure out] what his motives are. I think in his letter to Walter Haefner (CA’s largest shareholder), Wyly said he was sitting down and writing his memoirs. Maybe he was having thoughts of having a different kind of a legacy. I’m only speculating. He knows it’s a big fight and we know it’s a big fight. DD: CA has said it doesn’t want to spend a lot of money in a protracted takeover battle. How much do you estimate it will cost you? Wang: It’s probably somewhere close to $10 million or more. It isn’t even the money. It’s the time, the management focus. All those things in that sense are disruptive, but it also is an opportunity for us to articulate our mission, what makes us different, why we believe that what we have accomplished over the past 25 years is really the best for the investors and why the next 25 years are even going to be better. DD: What’s behind your lawsuit against Ranger Governance alleging that Wyly is in violation of a noncompetition agreement he has with CA? Wang: You’ll have to ask the lawyers. I get paid to develop. We listen to the lawyers. Ultimately, if we don’t want to do something, they can’t force me. But it’s part of their game. DD: Does that mean you have questions about your own attorneys’ strategy in this affair? Wang: The lawyers know how to spend money. The more activity, the more money they make. It’s a sad commentary, in a way, because they’re not creating value — they’re redistributing value. DD: CA’s stock has risen roughly 70 percent since the beginning of the year. To what do you attribute this growth? Wang: There’s a recognition that we have the pieces together with the right business model, the right people. We implemented this new business model back in the fall, and if you look at the record of it now, we’re doing well despite a bad economy. And Wall Street analysts, if you look at their reports, applaud this business model. It really gives them much better visibility and transparency to our numbers. DD: One of the knocks on CA is that the company does a poor job helping customers integrate its products. What remedies do you have for this problem? Wang: We’re only going to be as good as the last sales support service call. We have used a survey over the last three years. We also have relationship people whose whole incentive compensation is based on how well the numbers improve year after year. And every year it’s improved. You’re always going to find people who have some issues somehow. Our job is to make sure we address them immediately, and make sure they are satisfied. The other thing is that we use very good partners. We have our own service people to help them integrate our technology into their operations, although now the service work is being done by third-party consultant partners that work with us. DD: What is your response to Wyly’s criticism of the company’s customer-service record? Wang: I think he’s talking about a lot of the contractual-type things. If you’re pushing everybody to go to longer term [contracts], you have a separation between purchasing and technical departments in large corporations. And it’s something we have to constantly improve and that we constantly work on through surveys and talking to customers. The initiatives, the new business model — these are all from customers. DD: How did CA accumulate $4.5 billion in total debt and $3.6 billion in long-term debt? Wang: We’ve done our recent acquisitions, except for Sterling, with cash. We are not highly leveraged at all by any stretch and looking at any financial comparisons. We generated in the last three years more than $4 billion of positive cash flow. I think we’ve also returned to shareholders something like $1.5 billion over the last three years in terms of dividends and stock repurchases. DD: Do you agree with the chorus of observers who say Ranger Governance has little chance of snatching control of CA? Wang: Any time you have a fight or elections and you have people making up their minds, you always have risks, and you should take nothing for granted. We court the smallest investors to the very largest investors. We go after everyone to explain our story, to make sure that we’re articulating what is great about what has happened with CA, how we built it from nothing. Copyright (c)2001 TDD, LLC. All rights reserved.

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