Computer Associates 2006 Annual Report Download - page 56

implemented, and the end of fiscal year 2006 continued to contribute to subscription revenue on a monthly, ratable
basis. As a result, subscription revenue for fiscal year 2006 includes ratably recognized revenue from contracts
recorded in fiscal year 2006, as well as contracts recorded between October 2000 and the end of fiscal year 2005,
depending on contract length.
Subscription revenue for the fiscal year ended March 31, 2006 increased $251 million from fiscal year 2005, to
$2.84 billion. This increase was predominantly due to a $118 million increase in ratably recognized revenue from
the indirect business plus the increase in subscription revenue as a result of renewals of contracts whose revenue was
previously recognized on an up-front basis or as part of maintenance fees under our prior business model.
For the fiscal years ended March 31, 2006 and 2005, we added new deferred subscription value related to our direct
business of $2.61 billion and $3.49 billion, respectively. The $0.88 billion decrease in fiscal year 2006 as compared
to fiscal year 2005 in new deferred subscription value was primarily due to the decrease in early contract renewals
resulting from the transition away from a total bookings based compensation structure. In addition, CA signed
contract extensions with two customers in the fourth quarter of fiscal year 2005 that added approximately
$390 million in aggregate to new deferred subscription value in the period. We also recorded $195 million of
new deferred subscription value for the fiscal year ended March 31, 2006 related to our indirect business, which
increased 35% from the $144 million added in the prior fiscal year.
Licenses executed under our business model for our direct business had weighted average durations of 3.03 years
and 3.10 years, for the fiscal years ended March 31, 2006 and 2005, respectively. Annualized new deferred
subscription value represents the total value of all new software license agreements entered into during a period
divided by the weighted average life of all such license agreements recorded during the same period. The annualized
new deferred subscription value for the subscriptions booked in the direct business during the fiscal year 2006
decreased approximately $266 million, or 24% from the comparable prior fiscal year to approximately $861 million.
Subscription revenue for the fiscal year ended March 31, 2005 increased $474 million from fiscal year 2004, to
$2.59 billion. For the fiscal years ended March 31, 2005 and 2004, we added new deferred subscription value related
to our direct business of $3.49 billion and $2.29 billion, respectively. Licenses executed under our business model in
the years ended March 31, 2005 and 2004 had weighted average durations of 3.1 and 2.8 years, respectively.
Annualized deferred subscription value related to our direct business increased approximately $301 million, or
36%, for the fiscal year ended March 31, 2005 over the comparable prior fiscal year to $1.13 billion. In addition, we
recorded $144 million of new deferred subscription value for the fiscal year ended March 31, 2005 related to our
indirect business. Subscription revenue was further increased as a result of renewals of contracts whose revenue was
previously recognized on an up-front basis or as part of maintenance fees under our prior business model.
Under the prior business model, maintenance revenue was separately identified and was reported on the
“Maintenance” line item in the Consolidated Statements of Operations. Under our business model,
maintenance that is bundled with product sales is not separately identified in our customers’ license
agreements and therefore is included within the “Subscription revenue” line item in the Consolidated
Statements of Operations. Under the prior business model, financing revenue was also separately identified in
the Consolidated Statements of Operations. Under our business model, financing fees are no longer applicable and
the entire contract value is now recognized as subscription revenue over the term of the contract. The quantification
of the impact that each of these factors had on the increase in subscription revenue is not determinable.
Maintenance
Maintenance revenue for the fiscal year ended March 31, 2006 decreased $11 million, or 3%, from the comparable
prior year to $430 million. This decrease in maintenance revenue is a result of our transition to, and increased
number of license agreements under, our business model, where maintenance revenue is bundled along with license
revenue, and is reported on the “Subscription revenue” line item in the Consolidated Statements of Operations. The
combined maintenance and license revenue on these types of license agreements is recognized ratably on a monthly
basis over the term of the agreement under our business model. We cannot quantify the impact that our transition to
the new business model had on maintenance revenue since maintenance bundled with software licenses under our
business model is not separately identifiable. Maintenance revenue from our indirect business declined $5 million
36