Computer Associates 2007 Annual Report Download - page 44

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operating activity entitled “Financing obligations (collected) — current” and “Financing obligations (collected) — noncurrent”
in our Consolidated Statements of Cash Flows.
Amounts received in the current period that are attributable to later years of a license agreement from either a customer or
third party financing institution have a positive impact in the current period on billings and cash provided by continuing
operating activities. Accordingly, to the extent such collections are attributable to the later years of a license agreement,
billings and cash provided by operating activities during the license’s later years will be lower than if the payments were
received over the license term.
New Deferred Subscription Value — New deferred subscription value represents the total incremental value (contract value) of
software licenses sold in a period, which will be accounted for under our subscription model of revenue recognition. In the
second quarter of fiscal year 2005, we began offering more flexible license terms to our channel partners’ end users,
necessitating ratable recognition of revenue for the majority of our indirect business. Prior to July 1, 2004, such channel
license revenue had been recorded up-front on a sell-through basis (when a distributor, reseller, or VAR sold the software
product to its customers) and reported on the “Software fees and other” line item on the Consolidated Statements of
Operations. New deferred subscription value typically excludes the value associated with up-front or “perpetual” based
licenses, maintenance-only license agreements, license-only indirect sales, and professional services arrangements and does
not include that portion of bundled maintenance or unamortized discounts that are converted into subscription revenue upon
renewal of prior business model contracts.
New deferred subscription value is the aggregate amount we expect to collect from our customers over the terms of the
underlying subscription licenses based upon contractual license agreements entered into during a reporting period. This
amount is recognized as subscription revenue ratably over the applicable software license term. The license agreements that
contribute to new deferred subscription value represent binding payment commitments by customers over periods generally
up to three years. Typically, our new deferred subscription value increases in each consecutive fiscal quarter, with the fourth
quarter being the strongest. However, for fiscal year 2007, new deferred subscription value was highest in our third quarter
principally due to growth in sales of new products and services, an improved process for the management of contract
renewals, the benefits achieved from the realignment of our sales force earlier in the year, and an increase in the volume, length
and dollar amounts of large contracts during the third quarter. Since new deferred subscription value is impacted by the
volume and dollar amount of contracts coming up for renewal and the amount of early contract renewals, the change in new
deferred subscription value, relative to previous periods, does not necessarily correlate to the change in billings or cash
receipts, relative to previous periods. The contribution to current period revenue from new deferred subscription value from
any single license agreement is relatively small, since revenue is recognized ratably over the applicable license agreement
term.
Weighted Average License Agreement Duration in Years — The weighted average license agreement duration in years for our
direct business reflects the duration of all software licenses executed during a period, weighted to reflect the contract value of
each individual software license. The weighted average duration is impacted by the number and dollar amounts of contracts
coming up for renewal, and therefore may change from period to period and will not necessarily correlate to the prior year
periods. The annual weighted average duration of 3.29 and 3.03 years for the fiscal years 2007 and 2006, respectively, were
derived from the following quarterly new deferred subscription value amounts and quarterly weighted average durations in
years from our direct business:
NEW DEFERRED
SUBSCRIPTION
VALUE FROM
DIRECT SALES
(IN MILLIONS)
WEIGHTED
AVERAGE
DURATION
IN YEARS
NEW DEFERRED
SUBSCRIPTION
VALUE FROM
DIRECT SALES
(IN MILLIONS)
WEIGHTED
AVERAGE
DURATION
IN YEARS
FISCAL YEAR 2007 FISCAL YEAR 2006
Fourth Quarter $ 892 3.15 $ 969 2.89
Third Quarter 1,329 3.74 730 3.46
Second Quarter 498 2.98 575 2.92
First Quarter 388 2.48 336 2.70
$ 3,107 3.29 $ 2,610 3.03
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