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Computer Associates Beats Q3 EPS Estimates By $.02

23 January, 2001

Product Revenue Jumps 13%; EPS (earnings per share) Up 31%

Reaping the benefits of an innovative business model designed to provide greater flexibility to customers, to improve revenue predictability, and to unlock shareholder value, Computer Associates International, Inc. (NYSE: CA) today reported financial results for its third fiscal quarter.

The results, reported on a pro forma pro rata basis, beat analysts' consensus earnings per share estimates of $.40 by $.02.

For the quarter ended December 31, 2000, on a pro forma pro rata basis:

* Product revenue increased 13% to $1.284 billion from $1.140 billion in the prior year's fiscal quarter, exceeding company estimates. Reflecting the sale of the Sterling Federal Systems Group to Northrup Grumman, professional services revenue declined by 37%. Total revenue increased 5% to $1.404 billion from $1.332 billion. . * Operating net income for the December 31, 2000 quarter increased 28 percent from the prior year's fiscal quarter to $247 million.

* Third quarter operating earnings per share (diluted), exclusive of acquisition amortization effect and special charges, increased 31% to $0.42.

CA also announced that $629 million of the total contract value concluded in the quarter was not recognized as revenue for the quarter ending December 31, 2000. Under CA's new business model, this Residual Value will result in actual product revenue being recognized over the term of the underlying contracts.

For the nine months ended December 31, 2000 on a pro forma pro rata basis:

* Revenue increased 7% to $4.125 billion. . * Operating net income increased 17% to $677 million. . * Operating earnings per share (diluted), exclusive of acquisition amortization effect and special charges, increased 19% to $1.14.

Pro forma pro rata results are set forth in Table 1 which, is attached to this news release.

"We had a strong quarter," said CA President and CEO Sanjay Kumar. "We are excited about our prospects for Q4 as we strengthen our competitive position and build upon our success. Our advanced software portfolio, reputation for innovative solutions and flexible new business model is making it easier for our customers to do business with us in the New Economy."

"The residual value earned this quarter and in each quarter going forward represents an annuity to CA shareholders that transcends quarterly performance," said Kumar. "Building residual value will strengthen shareholder value through improved visibility and stability of future revenue streams."

These results reflect operations in part under CA's new business model and historical business model and, therefore, make the current quarter results not comparable to historical results. For this reason, CA is providing its financial results on a pro forma pro rata basis as announced on October 25, 2000.

The Software That Manages eBusiness*

To communicate CA's new focus on developing, delivering and supporting the software that manages eBusiness, the company this month launched a major corporate identity program. The program includes a new corporate brand identity with a new CA logo (, along with a major multimedia advertising campaign that will reach more than one billion households in 165 countries.

"We are uniquely positioned to lead the next generation of eBusiness solutions and deliver greater value to our shareholders, customers and employees," said Kumar. "We continue to see customer interest in our core focus areas which address the fundamental technical requirements of the next generation of eBusiness."

As part of its new focus on delivering The Software That Manages eBusiness, CA has grouped its eBusiness software into three strategic categories: eBusiness process management, information management and infrastructure management. Across these categories, CA will deliver leading, innovative technologies in six key solution areas: enterprise management, security, storage, transformation and integration, portal and knowledge management, as well as predictive analysis and visualization.

"We are committed to being number 1 or number 2 in each of these categories," Kumar said.

Additional third quarter highlights:

* Following a comprehensive audit of CA offices in 50 countries, CA became the first enterprise software company to be awarded worldwide ISO 9002 certification. ISO 9002 certification demonstrates that CA's entire

organization is focused on delivering solutions and services of the highest quality.

* CA announced a powerful B2B initiative that delivers the industry's broadest environment for building, securing and managing next generation online eMarketplaces. The initiative leverages CA's proven, award-winning technologies, as well as those of PurchasePro and other selected CA partners. . * CA released Jasmineii Portal, the industry's most powerful and comprehensive solution for delivering personalized information from diverse sources in visually compelling formats via the World Wide Web.

* CA announced the Intelligent CRM Suite, the first solution to help organizations both understand and retain customers through the intelligent analysis of transaction data.

* CA shipped Aion 9.0, the company's unique business rules automation engine that enables line-of-business managers to directly and immediately

modify application business rules in response to changing business requirements.

* CA released COOL:Gen 6.0 which through Web-client enablement and integration with Jasmineii, allows companies to reduce Web development costs and speed time-to-market for Web-based applications.

* CA received patents for its advanced, intelligence-based Neugents* technology and for its electronic software distribution technology.

* Addressing rapidly changing eBusiness management requirements, CA shipped Unicenter TNG Release 2.4, which optimizes Managed Service Provider operations and features comprehensive Linux platform support.

* CA announced the availability of the Service Level Management option for Unicenter TNG and NetworkIT 2.0, bridging IT and lines-of-business through simplified management of Service Level Agreements.

* A new IDC research report confirmed CA as the market leader in automated software deployment-possessing both the largest overall market share and one of the highest growth rates in the industry.

* CA announced ARCserve 7 for NetWare, providing premier data storage functionality for heterogeneous networking environments that incorporate

NetWare. CA also announced the availability of ARCserve 7 for Linux environments.

* CA and EMC Corporation announced an alliance to offer customers enhanced Storage Area Network (SAN) management and security solutions.

* CA's eTrust Intrusion Detection was awarded "Approved" status by NSS Group, a leading European network and security testing organization, and was one of only four products to achieve a detection rate of 100 percent on the NSS Group test network.

* CA became the first antivirus developer to deliver a working production version of its software for Palm Powered* handheld computers with the release of InoculateIT for the PalmOS? platform.

* CA announced the general availability of Endevor for OS/390 release 3.9, with major enhancements for extending management of critical eBusiness applications.

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