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Sanjay Kumar takes over as Computer Associates chairman

Ilaina Jonas in New York

Software maker Computer Associates International Inc, which has been under federal investigation for months, on Monday said its founder Charles Wang has stepped down as chairman, with immediate effecti, and was replaced by its chief executive.

Wang, 58, who founded the company 26 years ago, was named to the honorary position of chairman emeritus and Sanjay Kumar, 40, Wang's protege, added chairman to his executive titles.

Kumar joined Islandia, New York-based Computer Associates in 1987 and has served as president and CEO since August 2000.

"This to me is kind of a natural transition as well," said Kumar. "I don't think the company is going to see a lot of change .... I've been running the place for two years. I feel very comfortable in the role."

Shares of Computer Associates closed at $15.35, up 23 cents or 2 per cent on the New York Stock Exchange, and had been as high as $15.98 during the day. The Dow Jones industrial average, the indicator of the exchange, closed down 1 per cent.

"The popular feeling in the market is that Wang was going to be out by the end of the year," Prudential Securities analyst John McPeake said.

Wang has been the target of two proxy battles for control of CA and the company's past accounting has been the subject of investigations by the US Securities and Exchange Commission and the US Attorneys Office.

Prudential's McPeake said the company had been hinting to Wall Street that Wang was going to step down, having given up running the company's Asia operations in March.

"They were saying they were going to do it 'when the time was right,' not during a proxy battle, not during a transition period," McPeake said. "My question is why wouldn't he wait until the investigation cleared his name."

A spokesman for the US Attorney's Office for the Eastern District of New York declined to comment saying, "You should not read into this one way or another."

The SEC did not return calls.

The investigations have focused on a $1.1 billion compensation package the company awarded Wang, Kumar and co-founder Executive Vice President Russell Artzt in late 1998. Wang received the bulk of package, which was later reduced.

A person familiar with the matter said the investigations had nothing to do with Wang's decision to step down.

"We had anticipated this would happen," Stephen Perkins, president of Wyly's Ranger Governance, said. "It certainly was part of our basic understanding at the time we agreed to that that this process was in place and Charles would be leaving."

Wang retains control of 28.1 million shares, or slightly less than 5 per cent. Swiss billionaire Walter Haefner is the largest shareholder, owning about 19 per cent of the company.

Wang's retirement formally ends his career with the company he first operated out of a small office and financed through credit cards. Born in Shanghai, China in 1944, Wang moved to the United States in 1952. He earned a bachelor of science degree in mathematics from Queens College, and began his computer career at Columbia University's Riverside Research Institute as a programming trainee.

The company, which makes business software for mainframe and network computer systems, grew to become the world's No. 4 independent software maker, often gobbling up companies for billions and spitting out some of their employees.

It made Wang a billionaire and a target of fierce criticism, as in Computer Associates' failed hostile bid to take over Computer Sciences Corp. in 1998.

More recently the company, which had a reputation for treating customers abruptly, was the target of two proxy battles by Sam Wyly, the Texas billionaire who spent about $12 million on an all-out bid for control of the company in 2001 and another $2 million earlier this year. Wyly blamed Wang for Computer Associates' depressed stock, down 55 per cent from the beginning of the year.

Wyly backed out of his most recent attempt to oust Wang in August, after Computer Associates paid him $10 million to refrain from such attempts.

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