MARCH 6, 2000

By: ANTHONY BIANCO with Steve Hamm in New York and Manjeet Kripalani in Bombay

Software's Tough Guy

Charles Wang muscled his way to the top. Now he wants respect

Computer Associates International Inc.'s annual trade show, ''CA World,'' has evolved into an extravaganza. Last summer, 28,000 people from 80 countries packed the New Orleans convention center to pay homage to the software giant and Charles B. Wang, its chairman and chief executive. A stuntman doubling as Wang arrived for the keynote speech on a motorcycle that roared down an auditorium's center aisle on its back wheel, sped up a ramp, and hurtled airborne through a video screen, triggering a flash of light and thunderous sound effects. Later, the real Wang materialized on stage toting a 30-pound tuna. (Don't ask.) ''We take the theme of fun software very seriously,'' he deadpanned.
Even so, ''fun'' is not a word that most people would associate with CA or its software. Mention Wang to the average PC user and the response is likely to be, ''Huh?'' In 1999, CA (CA) sold $5.6 billion worth of software, trailing only Microsoft Corp. (MSFT) and IBM (IBM), but did not take in a dollar from the consumer market. CA makes a vast array of programs for managing large, diverse computer systems. ''We are all the plumbing behind the scenes, as opposed to all the pretty faucets,'' says Wang, 55.

Wang, who emigrated to New York City from Shanghai as a boy of 8, made himself a force in a quintessential New Economy industry using methods adapted from the Old Economy--the very Old Economy. Wang (pronounced ''Wong'') founded CA in 1976 and built it the same way that John D. Rockefeller built Standard Oil or Andrew Carnegie built U.S. Steel: consolidate and conquer. Completing a portrait in sepia-tone, this Robber Baron of Software lives in an old Roosevelt mansion near Oyster Bay on Long Island's North Shore, in the heart of Gatsby country. Wang's estate is close to CA headquarters, but it's about as far as you can get--in every sense--from glamorous Silicon Valley.

RECORD-BREAKER. In a tour de force of dealmaking, Wang assembled CA from the parts of some 200 companies. Along the way, he repeatedly broke the software industry record for the largest acquisition, the latest being the $4 billion purchase of Sterling Software Inc. announced on Feb. 14. Wang probably also holds the record for firing programmers, most of whom were canned just days after CA took control. The top executives of acquired companies were always the first to go. ''This dragon has only one head,'' Wang liked to say. He was no less ruthless with his customers, taking them to court if necessary to enforce CA's onerous licensing agreements to the letter. In 1992, CA even sued its largest customer, Electronic Data Systems Corp. (EDS), alleging licensing violations.

Wang's methods were harsh but effective. Today, CA extracts about 40 cents of operating profit from every $1 of revenue, making it the most profitable software company not named Microsoft. Wang, a billionaire twice over, succeeded beyond the wildest imaginings of his immigrant youth but at the cost of making himself into an info-tech pariah. By some accounts, he outdid even William H. Gates III, the notoriously sharp-toothed Microsoft mogul, in making enemies. ''There was a period when CA was the most disliked company in all of high tech,'' says Christopher W. Mortenson, a veteran software analyst at Deutsche Banc Alex. Brown.

Wang feigned indifference to his critics but by 1994 was so exasperated by the EDS litigation that he handed it off to Sanjay Kumar, now 37, his newly appointed whiz-kid president. In short order, Kumar negotiated a settlement that not only salvaged CA's relationship with EDS but also expanded it and made it more lucrative. Both chastened and inspired by what Kumar had accomplished, Wang gradually shifted focus from squeezing profit out of CA's quasi-monopoly franchise in mainframe computing to chasing abundant new opportunities opened by the Internetization of commerce.

MAKING NICER. Instead of firing employees en masse to make acquisitions quickly pay for themselves, Wang began treating acquired companies as launchpads into new software markets. At the same time, CA moved beyond the role of software ''chop shop'' to become an innovator in its own right and took pains to accommodate the very clients it had bullied for so long. ''If we'd talked a few years ago, you'd have heard me furious about CA,'' says Bruce P. Starr, a technology executive at Salomon Smith Barney. ''But we've worked through the issues they were unwilling to even talk about in the past and now have an agreement that allows us to run the business as it should be run.''

Wang and Kumar have managed to maintain the company's exceptional profit margins while doubling its base of business over the past four years. Most important, CA has extended its dominance of systems management from the slow-growing mainframe sector to client-server systems, which are booming along with Internet traffic. According to International Data Corp., CA has 30.6% share of the $4.3 billion client-server market, with IBM second at 11.1%. Today, CA derives fully 30% of its revenues from facilitating the e-commerce of its customers--an impressive figure considering that its traditional bricks-and-mortar clientele is just beginning to assert itself online.

These accomplishments have won CA a measure of new respect, but nowhere near what Wang believes he and his company are due. For all its recent progress, CA's stock still trades at an Old Economy earnings multiple of about 22, in part because its 15% revenue growth rate falls well short of New Economy standards. But to Wang, the real problem is that CA is overlooked and misunderstood. ''We're long on technology, but short on PR,'' he says. ''It's my own doing, so I'm going to fix it.''

Wang's willingness to pose in a tuxedo for the cover of BUSINESS WEEK is in itself emblematic of a radical change in attitude. For most of his career, Wang embraced anonymity as if it were success, relishing CA's status as ''the biggest software company no one ever heard of.'' Even as CA grew into a giant, Wang practiced an autocratic, patriarchal style of management, creating a defiantly insular culture. He rarely hired outside advisers, relying on the legal and financial expertise of his older brother, Anthony W. Wang, CA's longtime president.

But even in the days when the brothers Wang were running roughshod over the software industry, Charles' tough-guy persona masked an acute sensitivity to slights. ''He would become irate if anyone disrespected the company. Their name went into the black book, so to speak,'' says A. David Tory, a former CA executive who was among Wang's closest confidants throughout the 1980s. ''I had the sense sometimes that the focus of what CA was doing was not driven by pure business considerations, but by Charles' view that we ought to go and get someone.''

Revenge still seems to matter to Wang, but he has mellowed to the extent that he now subordinates its pursuit to CA's business interests, notably its public-relations campaign. In recent years, Wang has traveled relentlessly, making speeches and graciously fielding questions from all comers. Last fall, he made his second appearance at investment banker Herbert A. Allen's celebrified Sun Valley (Idaho) gathering of media moguls. Wang has written two books, which he uses as calling cards: Technovision, a primer for the technologically inexpert, and Wok Like a Man, a lavishly illustrated Chinese cookbook. In November, CA launched a glitzy $25 million corporate image campaign featuring the first television advertising the company has ever done, with the tagline ''Software That Thinks.''

Even some of Wang's archrivals are warming to CA. Wang ''has done a great job in operations, a spectacular job. We could learn from that,'' says Oracle Corp. CEO Lawrence J. Ellison, who as recently as 1996 dismissed CA as ''the scavenger'' of software's ecosystem. Adds Paul Mason, a veteran International Data analyst: ''At first, people were cynical about a kinder, gentler CA. But I think Wang is basically a decent individual who decided he didn't want to be remembered as the Attila the Hun of Software.''

Even so, putting a sheen on Wang's reputation promises to be a long-term project--and not just because the image of him as a mercenary brute is burned into the collective memory of info tech. Despite his best intentions, the fiery Wang remains ill suited to the role of statesman. New York Stock Exchange Chairman Richard A. Grasso, a CA director, likes to tease Wang about his temper. ''Charles,'' Grasso says, ''you're too Italian.'' It's a good line, but the fact remains that Wang's blunders periodically tarnish CA's image anew.

The most damaging of Wang's recent mishaps was a decision to take a massive write-off in mid-1998 to fund a grant of $1.1 billion in stock to CA's three senior execs: himself, Kumar, and Russell Artzt, executive vice-president of research and development. Wang's cut: $670 million, the most any CEO has ever made in a year. The grant was part of a complex plan to bind the executives to CA for 12 years. Wang and his board inflamed investors by awarding all 20 million shares on one day, instead of parceling out the stock (and the earnings write-downs) over a period of years.

CA was hit with at least 10 shareholder lawsuits and an avalanche of bad publicity that established Wang as the new face of CEO greed. Last November, a federal judge in Delaware ruled that Wang, Kumar, and Artzt must return nearly half the shares they were given because CA's plan lacked the customary clause adjusting the award for stock splits. Wang appealed the ruling, which he terms ''ridiculous.''

It has fallen to Kumar to try to smooth the feathers Wang seemingly cannot help but ruffle. ''Charles is outspoken on any topic he discusses. It doesn't cross his mind not to be,'' Kumar says. ''He's just not tactful.'' In Kumar's view, Wang's excess of candor is rooted in a two-tone worldview forged by the harshness of his early immigrant experience. ''What defines Charles,'' he adds, ''is that he sees things in black and white--things that most people see in shades of gray.''

It is almost midnight by the time that Wang returns to the airport in New Delhi and boards his Gulfstream IV jet. He closes the door to the jet's rear compartment, sheds his Brioni suit and power tie, and emerges in black jeans and a white T-shirt. In the front of the cabin, Wang climbs atop one of the oversized padded passenger seats and rests one bare foot on each armrest. He tosses a stack of papers to an aide sitting across from him. ''I did these today. They're not my problem,'' he says and then starts taunting her in a playground sing-song. ''Na, na-na, na, na. Not my problem.''

SHOWMAN-IN-CHIEF. The surprise upon meeting Wang is that a man of such exacting performance and fearsome reputation could seem so casual, so loose. Whether en route or on stage, he goes about his business with such gaiety, such high-energy bombast, that it's hard to believe that a major corporation has been entrusted to his care. For someone who has spent much of his life avoiding the spotlight, Wang seems awfully comfortable basking in CA World's glow.

Wang is CA's paterfamilias as well as showman-in-chief. The company headquarters in Islandia, N.Y., contains one of the finest child-care centers in Corporate America. All employees with children are eligible to use the facility, which opened in 1992 in what had been the executive dining room. Wang stops in regularly to see his own kids and at times joins in group play. Certifiably kid-crazy, he even lobbies childless CA managers to reproduce. ''Charles kept saying, 'When are you going to start a family?''' says Gayle Kemper, a top CA sales executive who had her first child in 1999. Kemper was relieved to know that becoming a mother wouldn't hurt her career. But Wang's enthusiasm was wearying. ''It almost got to the point where I didn't want to come in,'' she says.

Wang is not only a doting corporate father but also a strict one. Smoking is anathema to Wang, who keeps fit by playing a rugged brand of pick-up basketball and racquetball. At the last CA World, Wang spotted a mid-level manager smoking a cigarette just outside the convention center. He sped out the door and grabbed him by the lapels in midpuff. Wang laughed, but the smoker seemed paralyzed by surprise, if not fear. ''He almost swallowed that cigarette,'' Wang says happily. ''He'll remember that.''

''BLIND LOYALTY.'' By most accounts, Wang is forgiving of mistakes made by employees of unquestioned loyalty. But a manager who resigns to join a competitor is treated like a traitor by Wang and Kumar. ''We both have this blind loyalty issue,'' Kumar says. ''It's beyond words. It's till death do us part.''

Wang is approachable at work but enforces a strict separation between office and home. For a couple years, he even managed to keep his second marriage secret from close colleagues, although his wife, Nancy Li, is CA's chief technology officer. Until Li's pregnancy forced disclosure in 1992, she and her husband were careful to drive to work every morning in separate cars. These days, Wang carries a sheaf of photos of his two young children (a daughter, 7, and a son, 1) and will gladly show them to reporters, but insists on going off the record before divulging their names.

Wang's secluded life in Oyster Bay recapitulates in deluxe form the isolation of his formative years in New York City. When he, his parents, and his two brothers landed in Queens in 1952, the borough was not the multiethnic mosaic that it is today. The Wang boys were the only Chinese kids at grade school and on their Little League teams. Incidents of blatant racism were rare, but the family abandoned its first attempt at exchanging their walk-up apartment for a house after neighbors-to-be circulated an anti-Chinese petition.

Queens was a long way from Shanghai, where the Wangs had been comfortably ensconced among the pre-revolutionary elite. The family's home in the city's cosmopolitan French Quarter had a winding staircase with a banister ridden daily by Charles and his two brothers. Their father, Kenneth, was a judge on China's highest court until Mao Zedong and the Communist Party seized power in 1949. The elder Wang made do as president of a women's college until 1951, when he emigrated to New York via Hong Kong. His wife, Mary, and sons followed six months later, leaving all they owned behind.

Kenneth Wang taught international law at St. John's University while his wife pursued a master's degree in library science at Columbia University. To augment her husband's salary, Mrs. Wang typed envelopes late into the night. Charles (never ''Charlie'' or ''Chuck'') worked menial jobs and yet often was short the 32 cents to buy a school lunch. He tends to make light of the traumas of his youth, except to point out that he had it a lot tougher than Bill Gates, the son of a corporate lawyer. ''I know what it is to go hungry,'' Wang says. ''He doesn't.''

Tony, the eldest Wang son, and Francis, the youngest, both followed in the footsteps of their scholarly father. But Charles, the overshadowed middle son, underachieved from grade school through college. School both bored and angered him. The first time Russ Artzt laid eyes on Wang, he was berating a Queens College math professor for giving him an F on a test. Recalls Wang: ''This guy had come from MIT, but so what? I said, 'Don't teach me how to plug numbers into a formula, teach me how to think.'''

That Charles gravitated toward math and science was as much a function of parental pressure as aptitude. ''It was typical for Chinese immigrant parents to push kids into areas where communication was secondary,'' Wang says. Charles may have been born in China, but he grew up second-generation all the way. You can hear it today in his accent, a working-class Queens rasp tinged with Mandarin. ''I would say that being an immigrant had more of an impact than being Chinese,'' he says. ''I am as American as American can be.''

Not long after he graduated from Queens College in 1966, Charles answered a help-wanted ad for a computer programmer placed by Columbia University. He had never used a computer in his life, but talked his way into the job. ''After I did a couple of programs, I said, 'I want to do this for the rest of my life,''' says Wang.

After four years of programming at Columbia, he rotated through a series of small, dead-end firms as a software salesman. This phase of Wang's career usually is viewed in fast forward, but it is instructive to freeze-frame it in 1971, when the aspiring entrepreneur was slapped with a lawsuit that sounded a warning to the nascent software industry: Watch your back.

In 1970, National CSS, a computer time-share operator, hired the company Wang was working for--PDA Systems--to consult on a software project. Not long after PDA's contract expired, National CSS discovered a new debugging program on the market that was an exact knockoff of one it had developed, right down to the typos. National CSS sued PDA Systems and Wang, its president, alleging theft of trade secrets. Wang denied the charge and countersued, alleging defamation of character and violation of antitrust laws. Wang was represented by his brother Tony, who was working for a prestigious Manhattan law firm.

After a protracted court battle, a settlement was reached. National CSS licensed its debugger to PDA, which made one royalty payment and then filed for protection under the federal bankruptcy code. The court liquidated PDA and sold the debugger off to the highest bidder--none other than Charles Wang. National CSS objected, only to be threatened with contempt because it was not a PDA creditor. ''We had run up huge legal bills and effectively won our case but had nothing to show for it,'' laments a former executive of National CSS.

WAG THE DOG. In 1974, a small Swiss software company called Computer Associates signed up Wang as its U.S. distributor. Wang sold so much CA product that within a few years his distributorship was an American tail wagging a Swiss dog. In 1979, Tony Wang left his law firm and joined CA as his brother's right-hand man. The Wang brothers bought out the Swiss and took the company public. Charles owned 47.9% and Tony 21.6% of CA.

The urgency Charles brought to building CA was evident from the first of his acquisitions, the 1982 purchase of Capex Corp. Wang wanted to convert CA's bookkeeping to a Capex accounting program but was told it would take nine programmers six months to do it. ''Lividly pissed,'' as he puts it now, Wang wrote a rough but workable program on a red-eye flight back to New York that night. He says that he did not fire anyone at Capex, but then he didn't have to. ''People started quitting,'' he recalls. ''The Capex people were very different than us culturally.'' That is, Capex was devoted principally to the art of programming, CA to building a business empire as fast as possible.

PR POUNDING. As the brothers Wang perfected their takeover techniques, they stopped relying on attrition to cut costs. A team of CA managers parachuted into a newly acquired company, interviewed every employee, and fed the results into a special computer program developed by CA. ''If there are going to be reductions, I tell everyone at once,'' Wang says. ''Other CEOs told me they couldn't take the flak. But if you don't take it, you lie to your people.''

CA took a continuous PR pounding, but otherwise its ascent traced a smooth upward trajectory until the early 1990s, when it outgrew Wang's ability to micromanage the company. Charles trusted his older brother implicitly, but Tony was a dealmaker who knew nothing about technology. What CA needed was a well-rounded No. 2 executive who could make routine decisions and, in turn, push operating authority down into the ranks. Tony was no one's idea of a chief operating officer, but it seemed to Charles that Sanjay Kumar fit the bill nicely.

Kumar, an ethnic Tamil, left his native Sri Lanka at 14 and settled with his parents in Greenville, S.C. He started writing code in high school and dropped out of Furman University in 1983 to form his own software company. Kumar was just 25 and director of software development for Uccel Corp. when CA acquired it in 1987. Wang soon promoted Kumar to head strategic planning and made sure his protege was often featured in board meetings.

By 1992, the prevalent view on the board and within the upper management ranks was that it was time for Tony Wang to make way for Kumar. ''Everyone, including Tony, agreed it was the right thing to do,'' says one highly placed CA insider. ''But I can't tell you how difficult it was for Charles, who is very traditionally Chinese in some ways.'' Tony quietly resigned, a very rich man at 49. Today, Kumar is so highly regarded by the other Wang that he functions almost as co-CEO. ''There are not a lot of people Charles is close to at the company, but Sanjay is like his adopted son,'' says Peter A. Schwartz, CA's longtime chief financial officer, who left the company in 1998.

Kumar resembles his mentor in many ways, but he is less fearful of losing hard-won gains. It was Kumar's ascent as much as anything that inspired Wang to take a more expansive view of CA's opportunities for growth. In 1998, Wang decided to speed CA's diversification by bidding for Computer Sciences Corp (CSC), a leading technology services company and one of CA's biggest licensees. Refusing to take no for an answer, Wang bypassed CSC's management and took its $9 billion offer directly to shareholders through a hostile tender offer.

On Wall Street, the move was generally viewed as a kamikaze attack on a well-managed, if somewhat stodgy, company. Two weeks into the battle an article appeared in The Washington Post saying that CSC insiders were privately concerned about CA's ''ties to foreigners,'' notably Wang's efforts to ''not only nurture business in China but also help Chinese enterprises develop their software industries.'' The implication was that a CA takeover would imperil CSC's lucrative contracts with the Central Intelligence Agency and other agencies because of doubts within the government about where Wang's loyalties lay.

Wang, a naturalized U.S. citizen, considered this the first overt discrimination he had encountered in business. After many hours of anguished conversation with Kumar, Wang decided to drop CA's bid for CSC. ''His biggest concern was that if we went through with the deal, he'd end up standing in front of a roomful of thousands of CSC employees divided by race,'' Kumar says. CSC officials vehemently deny that their tactics were racist, but Wang will have none of it. ''They know what they did,'' he snaps. ''They played the race card.''

BOUNCING BACK. Wang rebounded from the stinging CSC defeat with characteristic audacity, dispatching Kumar to make an offer to an executive who had defined himself by his hatred of CA: Andrew ''Flip'' Filipowski.

This swaggering Chicagoan was CEO of Platinum Technology International Inc., the world's eighth-largest software independent. Filipowski was almost as voracious an acquirer as Wang but not nearly his equal as an operator. Even as Filipowski's no-layoffs policy took a mounting toll on earnings, he repeatedely vowed that he would rather liquidate his Platinum than sell to ''cold and brutal'' CA. He says now it was all an act: ''It's the same as Sun and Microsoft, or Coke and Pepsi. You've got to present an archrivalry to the investment community.'' Even so, when Kumar knocked on his door in early 1999, Filipowski initially refused to open it.

That the $3.5 billion deal was done anyway--and quickly--is testament not only to Kumar's persuasiveness but the gravity of Platinum's financial problems. Wang and Filipowski met for the first time at a post-deal press conference. Wang did not offer his erstwhile nemesis a job, but did become an equity investor in Filipowski's new company, an Internet startup immodestly called divine interVentures. Filipowski now is as extravagant in praising CA as he once was in criticizing it: ''Charles and Sanjay have done a magnificent job.''

HIGH-TECH CURMUDGEON. Wang parlayed the Platinum acquisition into a two-for-one revenge play. To maintain its access to Platinum's software, CSC had to renegotiate an expanded licensing agreement with CA. Van B. Honeycutt, CSC's chief, also wanted Wang to drop a lawsuit CA had filed during the takeover tussle. This Wang was happy to do, provided that Honeycutt apologized. In October, 1999, CA and CSC put out a joint press release that included this statement: ''CSC does not condone any remarks which may have been made by individuals working on or reporting on the takeover attempt or our defense, that could be construed or misperceived as discriminatory in any manner.''

Abject it was not, but Wang claimed victory. ''It's nice that Van apologized,'' Wang says, ''but I can tell you we didn't shake hands on it--and I'm not going to be calling him to play golf, either.''

When Wang took his first tentative steps into the spotlight in the mid-1990s, he presented himself as a high-tech curmudgeon. Wang held himself out as a caustic voice of common sense in a wilderness of technobabble. ''There's too much baloney going on,'' he said in 1994. ''The hype in this industry! It's so bad.'' He had a point, but all the straight talk probably didn't do CA any good. As investors' high-tech infatuation reached new peaks with Internet mania, CA was tagged as a wallflower at the prom to end all proms.

Wang thinks talk of an e-commerce ''revolution'' is harmful, because it induces companies to create Internet systems on a stand-alone basis instead of integrating them with existing operations. But yesteryear's skeptic has been reborn as an unabashed optimist who expects the Web to continue to drive quantum leaps in computing levels for years to come. Wang is a believer, but true to form, he is charting his own contrarian course through the Internet Age.

CA's unfashionability on Wall Street goes well beyond the vagaries of image and reputation. At a time when investors are fixated on ''pure play'' stocks, CA is the ultimate software conglomerate. With 850 different programs, it has breadth and complexity of product unequaled even by IBM. Much as he believes in the potential of e-commerce, Wang has no intention of issuing a tracking stock or spinning out any of his e-glamorous assets into separate companies. He adheres to his long-standing belief that the more technology CA owns, the better it will be able to do what a systems management house must do: integrate disparate technologies into a seamless whole.

CA is unusual among U.S. software companies in its degree of emphasis on developing overseas markets--especially Asian ones. Accompanied by his wife, who was born in Taiwan, Wang made his first trip back to China in 1995. He since has returned frequently and also has traveled to Taiwan, Japan, Korea, and Hong Kong. In November, he made his first trip to India with Kumar, who has been virtually commuting to the Subcontinent over the past few years. Wang and Kumar obviously have a special affinity for Asia, and the feeling is mutual. Throughout his recent journey to India, Wang was invariably introduced as ''the richest Asian immigrant to America.''

In Bangalore, India's Silicon Valley, Wang awoke to a full-color ad in The Economic Times, with this headline:


The ad was paid for by Bangalore Labs. T.G. ''Tiger'' Ramesh, a co-founder of the company, says that the main reason he admires Wang more than any other American tech executive is that ''Asians were not even a blip on the radar screen of entrepreneurship'' when he founded CA.

CA's emphasis abroad has been to go native by forming partnerships with telecoms, Internet service providers, and other tech companies. These arrangements generate less revenue up front but further Wang's basic strategy of embedding CA in the wet cement of Asia's emerging Net infrastructure, much as it hard-wired itself into the heart of mainframe computing in the U.S. three decades ago.

In other words, CA is taking the long view. Wang, who started out as a programmer when Gates was still in junior high school, says he has no intention of kicking himself up to chairman, the way that Gates, 44, did in January. ''I feel like I'm just starting my business,'' he says, ''except that the opportunity is greater now.'' Wang may never be admired in his adopted country the way he is in the continent where he began his life's journey. But if past truly is prologue, he will pursue the respect that he craves relentlessly and in his own defiantly different way.

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