Computer Associates 2011 Annual Report Download - page 43

Cost of professional services
Cost of professional services consist primarily of our personnel-related costs associated with providing professional services.
For fiscal 2011, the costs of professional services increased compared with fiscal 2010 primarily due to an increase in
services projects, as reflected by the $39 million increase in revenue. These costs increased at a higher rate than revenue
primarily as a result of a higher mix of engagements that required additional effort to meet customer requirements during the
second quarter of fiscal 2011. These engagements resulted in lower margins and as a result gross margins on professional
services decreased to 7% for fiscal 2011, compared with 10% for fiscal 2010.
For fiscal 2010, cost of professional services decreased compared with fiscal 2009 primarily due to a $36 million decrease in
consulting and personnel costs primarily due to lower sales volumes. Professional services gross margin for fiscal 2010 was
10% as compared with 14% for fiscal 2009 mostly due to lower utilization rates resulting from the decrease in sales.
Amortization of capitalized software costs
Amortization of capitalized software costs consists of the amortization of both purchased software and internally generated
capitalized software development costs. Internally generated capitalized software development costs relate to new products
and significant enhancements to existing software products that have reached the technological feasibility stage.
For fiscal 2011, amortization of capitalized software costs increased compared with fiscal 2010, primarily due to the increase
in amortization expense associated with our fiscal 2011 and 2010 acquisitions and the increase in activities relating to
projects that have reached technological feasibility in recent periods.
For fiscal 2010, amortization of capitalized software costs increased compared with fiscal 2009, principally due to the
capitalizable value of projects that have reached technological feasibility in prior periods.
Selling and marketing
Selling and marketing expenses include the costs relating to our sales force, channel partners, corporate and business
marketing and customer training programs. The increase in selling and marketing expenses for fiscal 2011 compared with
fiscal 2010 was primarily due to an increase in personnel-related costs of $46 million, of which $22 million primarily related
to costs associated with our fiscal 2011 and 2010 acquisitions. Promotional and travel costs increased by $39 million,
primarily due to $20 million of costs associated with CA World, our user conference, and our re-branding initiative. CA World
occurred in the first quarter of fiscal 2011 and is our largest periodic promotional and marketing event that takes place
approximately every 18 months. Included in the promotional and travel cost increase is $10 million of additional expenses
that were associated with our fiscal 2011 and 2010 acquisitions. A portion of the increase in personnel and promotion costs
is associated with our continued investment in emerging enterprises and emerging geographies.
The increase in selling and marketing expenses for fiscal 2010 as compared with fiscal 2009 was primarily due to increased
personnel costs of $20 million partially from acquired companies and higher commission costs of $30 million resulting from
new product sales partially offset by reduced promotion expenses of $21 million, principally attributable to the timing of CA
World, which took place in the third quarter of fiscal 2009.
General and administrative
General and administrative expenses include the costs of corporate and support functions, including our executive leadership
and administration groups, finance, legal, human resources, corporate communications and other costs such as provisions for
doubtful accounts.
The decrease in general and administrative expenses for fiscal 2011 compared with fiscal 2010 was primarily related to a
decrease in personnel-related and office costs of $29 million and consulting costs of $15 million. The decrease in personnel-
related expense was primarily due to lower financial performance attainment levels under our equity and cash compensation
plans for fiscal 2011. In fiscal 2010, we incurred costs related to the departure of our Chief Executive Officer and the
transition to his successor. These decreases were offset by increases in personnel costs of $20 million associated with our
fiscal 2011 and 2010 acquisitions.
General and administrative expenses for fiscal 2010 compared with fiscal 2009 increased $15 million primarily due to the
aforementioned costs related to the departure of our Chief Executive Officer. We also incurred a $12 million increase in costs
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