Computer Associates 2006 Annual Report Download - page 31

of U.S. and foreign patents and pending applications that may have value to various aspects of our products and
technology, we are not aware of any single patent that is essential to us or to any of our principal business product
areas.
We continue to invest extensively in product development and enhancements. We anticipate that we will continue to
adapt our software products to the rapid changes in the computer industry and will continue to enhance our products
to help them remain compatible with hardware changes. We expect that we will continue to be able to improve our
software products to work with the latest hardware platforms and operating systems.
To keep CA on top of major technological advances and to ensure our products continue to work well with those of
other vendors, CA is active in every major standards organization and takes the lead in many. Further, CA was the
first major software company to earn the International Organization for Standardization’s (ISO) 9001:2000 Global
Certification, the ultimate ISO certification.
In addition, CA has built a strong global product development staff in Australia, China, the Czech Republic, France,
Germany, India, Israel, Japan, the United Kingdom, and the United States. Our technological efforts around the
world ensure we maintain a global perspective of customer needs while cost-effectively tapping the skills and
talents of developers worldwide, and enable us to efficiently and effectively deliver support to CA customers.
In the United States, product development is primarily performed at our facilities in Brisbane/Redwood City,
California; San Diego, California; Lisle, Illinois; Framingham, Massachusetts; Mount Laurel, New Jersey; Islandia,
New York; Plano, Texas; and Herndon, Virginia.
For the fiscal years ended March 31, 2006, 2005 and 2004, the costs of product development and enhancements,
including related support, charged to operations were $697 million, $708 million, and $703 million, respectively. In
fiscal years 2006, 2005 and 2004, we capitalized costs of $84 million, $70 million, and $44 million, respectively, for
internally developed software. The increase in capitalized costs for fiscal year 2006 as compared with fiscal year
2005 was principally related to an increase in capitalized development costs for our Unicenter r11 and BrightStor
products.
Customers
No individual customer accounted for a material portion of our revenue during any of the past three fiscal years, or a
material portion of the license contract value that has not yet been earned (deferred subscription value) reported at
the end of any period in the past three fiscal years. At March 31, 2006, five customers accounted for approximately
71% of our outstanding prior business model net receivables, including one customer with a license arrangement
that extends through fiscal year 2012 with a net unbilled receivable balance in excess of $400 million. The majority
of our software products are used with relatively expensive computer hardware. As a result, most of our revenue is
generated from customers who have the ability to make substantial commitments to software and hardware
implementations. Our software products are used in a broad range of industries, businesses, and applications. Our
customers include manufacturers, technology companies, retailers, banks, insurance companies, other financial
services providers, educational institutions, health care institutions, and governmental agencies.
We have a large and broad base of customers. We currently serve companies across every major industry worldwide,
as well as government and educational institutions. When customers enter into a software license agreement with
us, they often pay for the right to use our software for a specified period of time. When the terms of these agreements
expire, the customer must either renew the license agreement or pay usage and maintenance fees, if applicable, for
the right to continue to use our software and receive support. We believe that our flexible business model allows us
to maintain our customer base while allowing us the opportunity to cross-sell new software products and services to
them.
Customer Satisfaction and Support
Customer satisfaction is important to CA. We tie a portion of individual compensation for approximately 700 senior
CA managers to our customers’ satisfaction, which we measure through independent surveys. The goal of CA
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