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CA Technologies’ Mainframe Segment Hurt by Softness in New Sales

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Cause of softness

CA Technologies’ (CA) Mainframe Solutions segment, which contributes the bulk of the company’s business, reported 6% YoY (year-over-year) growth in revenue to $552 million in fiscal 3Q18. However, on a constant currency (or CC) basis, it remained flat YoY. The increase in revenue was primarily driven by the impact of favorable foreign exchange, although offset by Mainframe Solutions’ new sales.

In the reported period, the operating margin for the Mainframe Solutions segment was 64% compared to 61% in the same period last year.

In the graph above, you can see the revenue growth for Mainframe Solutions in the last five quarters. During that period, it grew at a CAGR (compound annual growth rate) of 0.3%.

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In fiscal 3Q18, Mainframe Solutions’ new sales fell in the low single digits, both on a reported and CC basis, mainly due to fewer renewals of subscriptions than last year. However, solid new product sales, buoyed by existing and new products such as Dynamic Capacity Intelligence, Data Content Discovery, and Mainframe Operational Intelligence, helped mitigate further declines in revenue for the segment.

Can new product launch drive Mainframe Solutions?

The CA Trusted Access Manager, designed particularly for International Business Machines’ (IBM) Z platform, delivers the Privileged Access Management mainframe. It avoids the requirement for shared privileged credentials, thus allowing customers to maintain complete control of sensitive, mission-critical information.

The bulk of the world’s business data is on mainframes. So the launch of these new product classes increases MIPS (million instructions per second) and delivers more security to customers. That could create opportunities to drive the company’s Mainframe Solutions segment going forward.

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