Computer Associates 2007 Annual Report Download - page 46

fee revenue has declined substantially as the majority of contracts entered are recognized as subscription revenue over the
term of the contract. We are not able to quantify the impact that each of these factors had on subscription revenue.
Subscription revenue for fiscal year 2007 increased $230 million, or 8%, from the comparable prior year period to $3.07 billion.
Sales made directly to our end-user customers, which we define as our direct business, contributed approximately
$2.84 billion to subscription revenue compared to $2.68 billion in the comparable prior year. The increase was primarily
due to growth in new deferred subscription value from the sale of solutions in the areas of infrastructure management,
business service optimization and security management led by the sale of acquired products. In addition, subscription revenue
was favorably impacted by the manner in which we record maintenance revenue under our business model, as described
above, as well as favorable impacts from foreign exchange. Sales made through our channel partners, which we define as our
indirect business, contributed approximately $232 million to subscription revenue compared to $153 million in the
comparable prior year period. The increase was principally due to the inclusion of approximately $46 million of
subscription revenue related to VARs that were previously classified as part of our direct business in the prior fiscal year,
as well as favorable impacts from foreign exchange and the continued transition of indirect revenue to the ratable model,
which began in the second quarter of fiscal year 2005.
During fiscal year 2007, we added new deferred subscription value related to our direct business of $3.11 billion as compared
with $2.61 billion, for fiscal year 2006. The increase in new deferred subscription value in our direct business was primarily
attributable to the 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 number,
length and dollar amounts of large contracts during the fiscal year, which resulted in an increase in the weighted average
contract length. During fiscal year 2007, we renewed fourteen license agreements with contract values in excess of $25 million
each, for an aggregate contract value of approximately $729 million. This is compared to the prior fiscal year, when seven
license agreements were executed with contract values in excess of $25 million each, for an aggregate contract value of
approximately $259 million. With respect to our indirect business, for fiscal year 2007, we added new deferred subscription
value of $183 million, as compared with $195 million for fiscal year 2006.
The weighted average duration of license agreements executed in fiscal years 2007 and 2006 for our direct business was 3.29
and 3.03 years, respectively. The increase was attributable to an increase in the number and amounts of contracts executed
with contract terms longer than the historical averages. During fiscal year 2007, there were twenty-one contracts with
durations of five years or longer, representing approximately $531 million of new deferred subscription value. In contrast, there
were eleven such contracts executed in fiscal year 2006, representing approximately $190 million of new deferred
subscription value. One contract executed in the third quarter of fiscal year 2007 had a contract term of approximately
seven years and represented new deferred subscription value greater than $130 million.
Subscription revenue for fiscal year 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.
During fiscal year 2006, we added new deferred subscription value related to our direct business of $2.61 billion, as compared
with $3.49 billion, for fiscal year 2005. The $0.88 billion decrease in new deferred subscription value was primarily due to the
decrease in early contract renewals resulting from a change in the fiscal year 2006 commission plan that transitioned away
from a total bookings based compensation structure. In addition, we signed contract extensions with two customers in the
fourth quarter of fiscal year 2005 that added approximately $390 million in the aggregate to new deferred subscription value
in the period. We also recorded $195 million of new deferred subscription value for fiscal year ended March 31, 2006 related
to our indirect business, which increased 35% from the $144 million added in the prior fiscal year.
The weighted average duration of license agreements executed in fiscal years 2006 and 2005 for our direct business was
3.03 years and 3.10 years, respectively. The decline was primarily attributable to one large contract executed in the fourth
quarter of fiscal year 2005 that represented approximately $300 million in new deferred subscription value and had a term of
four years.The decline was partly offset by an increase in the dollar amounts of contracts executed with contract terms longer
than the historical averages. During fiscal year 2006, there were eleven contracts with durations of five years or longer,
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