Business software maker CA Inc, trying to shake off sluggish sales growth, is digging into a sizeable war chest built over the years to propel growth through acquisitions and a renewed focus on its own products.
CA may spend more than the $300 million to $500 million it earmarked for acquisitions in the fiscal year ending March 31, 2015 to bolster its cloud and security operations, Chief Executive Michael Gregoire told Reuters in an interview.
"We have $3.3 billion in cash. We have a lot of flexibility to do a variety of acquisitions," Gregoire said, adding that he prefers doing small deals.
He said CA will also invest more on developing its home-grown products, a number of which are expected to be launched by November.
CA, which also makes cloud software, is keen to reclaim its status as a high-growth company, following its struggle in recent years to cope with competition from bigger rivals such as IBM Corp, Oracle Corp and VMware Inc.
"If they make the right acquisition that can really go a long way towards moving the top line in the right direction," FBR Capital Markets analyst Daniel Ives said.
Revenue declined 2.1 percent to $4.5 billion in fiscal 2014. In the previous six years, revenue has varied little, ranging between $4.14 billion and $4.78 billion.
CA's new plans tie in with a restructuring launched in May last year by Gregoire, four months after he took over the top job when William McCracken retired.
The plan includes selling non-core assets such as its Arcserve data protection business and cutting 1,800 jobs.
In their place, CA hired about 1,000 people with specific cloud specialty skills, said Gregoire, an avid competitive cyclist.
Before Gregoire took over, the company spent nearly $1 billion in three years to buy software companies such as Nimsoft, Arcot and Interactive TKO to beef up its cloud business.
Gregoire believes CA lost its edge in building unique products and spent too much on buying companies that had no earnings.
"So, one of the things that I have been very explicit about is that we have to be great software engineers," he said.
Under Gregoire, CA has made at least two acquisitions, including the $155 million purchase of Layer 7 Technologies.
Gregoire's preferred strategy involves investing in building products around data security, cloud management and DevOps, with particular focus around the mobile ecosystem.
DevOps is a software development method to increase collaboration between software developers and IT operations to release products faster.
"They have challenges ahead, that's clear, but you feel like they are starting to move this in the right direction," Ives said.
CA's shares ended Tuesday at $28.47, about two-thirds lower than their record high of $79.44 in January 2000. IBM and Oracle have gained roughly 60 percent and 46 percent, respectively, in the same period.
(Editing by Feroze Jamal and Savio D'Souza)