updated 9/29/2004 9:49:13 AM ET 2004-09-29T13:49:13

Computer Associates International Inc. announced a restructuring plan Wednesday that would reduce its work force by 800 people worldwide, saving the business software maker $70 million annually once the plan is fully implemented.

The announcement of the 5 percent cut in its work force comes in the wake of the Islandia, N.Y.-based company’s recent agreement to pay $225 million to shareholders in a settlement letting it defer criminal prosecution in relation to an accounting probe conducted by the Department of Justice and the Securities and Exchange Commission.

In the unusual deal, an outside monitor will track the company’s financial reporting while it makes three restitution payments of $75 million to shareholders over 18 months.

The company’s former CEO, Sanjay Kumar, pleaded not guilty last week to federal securities fraud and other charges. The company’s former head of worldwide sales, Stephen Richards, also entered a not guilty plea.

A statement from the company Wednesday said the plan would focus on driving marketing efficiencies and improving productivity. It said the job cuts would affect all departments but that the impact on its sales force would only be minimally affected.

A majority of the reductions are expected to be completed by October.

“Now is the time for CA to move forward,” said Computer Associates CEO Kenneth Cron. “CA has great strengths in its technology, its customer base and its balance sheet. To ensure our long-term success, we need to effectively leverage these strengths and realign our investments with the company’s strategic growth opportunities.”

Computer Associates officials predict the cost of the restructuring plan will be about $40 million. About $25 million of that is expected to be incurred in the second quarter of fiscal 2005.

“This restructuring will have no effect on our ability to fulfill the obligations of the deferred prosecution agreement announced last week,” Cron said.

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