Out of the valley: Wang war boils up to bloody ending

Next Wednesday promises to be an entertaining day for anyone connected with Computer Associates, the software giant. That's when Texan billionaire Sam Wyly finds out if his spectacular bid to oust four members of the CA board, including founder Charles Wang, is more than a pipe dream.

Mr Wyly, who sold two of his companies to the ever-acquisitive CA, has spent the past couple of months in a bitter battle with the CA management team. He has slammed the company's accounting policies, lambasted it for "mistreating" staff while doling out huge compensation packages to top executives, and claimed to have dug up evidence that almost half its customers would jump ship if they could.

While the CA board has fought back hard, shooting holes in Mr Wyly's arguments and mounting a credible defence of its record, many of these allegations are familiar to CA watchers. As it fought its way up to become the fourth-largest software company in the world, it developed a reputation for being, let's say, difficult. Numerous former employees, many of them sucked in and spat out during the many takeovers that have fuelled the company's growth, have an axe to grind with CA. Some customers have publicly criticised it. And the accounting controversy still bubbles away.

That issue was the central theme of an article run by The New York Times in April. Headlined "A software company runs out of tricks", it questioned the way CA books revenues upfront from long-term contracts, and highlighted the stark differences between its preferred method of financial reporting and the poorer figures that come out under generally accepted accounting principles. The article prompted a robust response, in which CA defended its accounting techniques, said they were approved by auditors, and took the paper to task on a range of issues – from who it's suing to whether or not it hires "young cute girls to resell maintenance contracts".

This furore has given Mr Wyly plenty of ammunition to support his claim that CA's leadership is damaging the company's credibility. His own behaviour, however, hasn't gone uncriticised. His initial plan to head a full-blown takeover of the 10-strong CA board has been watered down to winning four seats – something that could create a boardroom divide and, CA claims, paralyse the company. There's also the matter of a letter he sent his own staff at Sterling Software, as he sold it, in which he stated that CA "is a good place to work" – helpful at the time to ease the acquisition but unfortunate in hindsight. Meanwhile, the CA propaganda machine has been working overtime, arguing that its stock price over the past year has outperformed IBM, Intel and Microsoft, and pointing to favourable findings from independent customer and employee satisfaction surveys.

Just how much support Mr Wyly has gathered remains to be seen. Two proxy voting advisory services came out behind him last week, but Walter Haefner, a friend of Mr Wyly's who controls 21 per cent of CA's shares, backed the board. Whatever happens, it won't be the end of the story: Mr Wyly and The New York Times aren't the only critics of the CA machine.