Computer Associates 2005 Annual Report Download - page 54

Table of Contents
Statements of Operations. The decrease in software fees and other was partially offset by an increase in the amount of indirect license
revenue recorded in fiscal year 2004 as compared with fiscal year 2003.
Financing Fees
Financing fees result from the initial discounting to present value of product sales with extended payment terms under the prior business
model, which required up-front revenue recognition. This discount initially reduced the related installment accounts receivable and was
referred to as “Unamortized discounts.” The related unamortized discount is amortized over the life of the applicable license agreement
and is reported as financing fees. Under our Business Model, additional unamortized discounts are no longer recorded, since we no
longer recognize revenue on an up-front basis for sales of products with extended payment terms. As expected, for fiscal years 2005 and
2004, financing fees continued to decline, reflecting a decrease of $57 million and $85 million, respectively, from the prior fiscal years
to $77 million and $134 million, respectively. The decrease in financing fee revenue for both years is attributable to the discontinuance
of offering license agreements under the prior business model and is expected to decline to zero over the next several years.
Professional Services
Professional services revenue for fiscal year 2005 increased $10 million from fiscal year 2004 to $244 million. The increase was
primarily attributable to growth in security software engagements, which utilize Access Control and Identity Management solutions as
well as growth in IT Service and Asset Management solutions. The increase was also partially attributable to approximately $4 million
of services revenue associated with the sale of Netegrity products. This increase in services revenue was limited due to an increase in
services sold in combination with related software products of approximately $14 million, which requires that such services revenue be
recognized ratably over the life of the related software contract period.
Professional services revenue for fiscal year 2004 decreased $14 million from fiscal year 2003 to $234 million. The decrease was a result
of the weak spending environment that affected the IT service sector in general, our continued shift in focus to professional services
engagements that are focused solely on our software products, as well as services sold in combination with related software products of
approximately $6 million, which requires that such services revenue be recognized ratably over the life of the related software contract
period. Our professional services headcount was reduced by approximately 250 as a result of the creation of our CA Technology
Services group in April 2003. Quantification of the impact that these factors had on the decrease in professional services revenue is not
determinable.
Total Revenue by Geography
The following table presents the amount of revenue earned from the United States and international geographic regions and
corresponding percentage changes for the fiscal years ended March 31, 2005, 2004 and 2003. These comparisons of financial results are
not necessarily indicative of future results.
Fiscal Year 2005 Fiscal Year 2004
(dollars in millions)
(restated) (restated) (restated) (restated)
2005 2004 Change 2004 2003 Change
United States $ 1,838 $ 1,755 5% $ 1,755 $ 1,748
—
International 1,722 1,565 10% 1,565 1,309 20%
$ 3,560 $ 3,320 7% $ 3,320 $ 3,057 9%
International revenue increased $157 million, or 10%, in fiscal year 2005 as compared with fiscal year 2004. The increase in
international revenue was primarily attributable to a positive impact to revenue from fluctuations in foreign currency exchange rates of
approximately $103 million for fiscal year 2005 over fiscal year 2004. The increase in foreign currency exchange is primarily associated
with the strengthening of both the euro and the British pound versus the U.S. dollar. The increase was also a result of an increase in
contract bookings in prior periods associated with our European business. The increase in revenue from the United States was primarily
attributable to an increase in contract booking in prior periods as well as an increase in professional services revenue. The increase was
partially offset by decreases in revenue from maintenance, finance fees, and software fees and other revenue.
International revenue increased $256 million, or 20%, in fiscal year 2004 as compared with fiscal year 2003. The increase in
international revenue was primarily attributable to a positive impact to revenue from fluctuations in foreign currency exchange rates of
approximately $173 million for fiscal year 2004 over fiscal year 2003, which was primarily caused by the strengthening of both the euro
and the British pound versus the U.S. dollar. The increase was also a result of an increase in contract bookings in prior periods associated
with our European business. Despite an increase in fiscal year 2004 of combined subscription, maintenance, and financing revenue in the
United States of approximately $59 million, compared with fiscal year 2003, total revenue in the United States declined slightly
primarily due to a decrease in professional services revenue and software fees and other.
Price changes and inflation did not have a material impact in fiscal years 2005, 2004, or 2003.
23