Computer Associates 2012 Annual Report Download - page 33

We are the leading independent software vendor in the mainframe space, and we continue to innovate on the mainframe platform,
which runs many of our largest customers’ most important applications. As the IT landscape continues to evolve, more companies are
seeking to improve the efficiency, mobility and availability of their IT resources and applications by adopting next-generation
technologies like virtualization and cloud computing and consuming IT as SaaS.
While these technologies can reduce operating costs tied to physical infrastructure, this evolution in computing is also making IT
environments more complex. Data centers are evolving to include mainframes, physical servers, virtualized servers and private,
public and hybrid (a combination of public and private) cloud environments.
We believe it is vital for companies to effectively accelerate, transform and secure all of their various computing environments, while
being able to deliver new services quickly based on business needs. Our core strengths in IT management and security, combined
with our investments in innovative technologies, position us to serve a range of customers which we have divided into three customer
segments: (1) approximately 1,000 core customers with annual revenue in excess of $2 billion (Large Existing Enterprises), which
currently account for approximately 80% of our revenue; (2) enterprises with revenue in excess of $2 billion that have not historically
been significant customers of ours (Large New Enterprises), a customer segment which we believe includes 4,500 potential new
customers but where we intend to initially focus on approximately 1,000 of these customers selected based on our current
geographical and vertical strengths; and (3) approximately 7,000 enterprises with revenue between $300 million and $2 billion and in
fast growing geographies like Latin America and Asia (Growth Markets). We believe by targeting these customer segments, we are
more than doubling our total addressable market.
To enable us to execute on our business strategy more effectively, we:
•Began rebalancing our sales force to add 300 new quota-carrying sales representatives, of which one-third are new to the
Company. Both the new and reallocated representatives will be dedicated to and compensated for selling new products to
customers.
•Aligned our business, including both internal business units and some operational functions, to more closely align with our
products to reflect both the evolving markets and our new target customers.
•Held our user conference in November 2011, CA World, which brought together IT professionals from around the world to
exchange IT management strategies. During the conference, we announced key initiatives centered on our theme of “IT at the
Speed of Business,” which support customers as they transition from simply managing IT to delivering business services.
•Acquired privately held Interactive TKO, Inc. (ITKO), a leading provider of service simulation solutions for developing
applications in composite and cloud environments.
•Acquired Base Technologies, a privately held consulting firm focused on the management of IT assets, with leading practices in
virtualization management, mainframe technology, security and managed IT infrastructure.
•Sold our non-strategic Internet Security business.
•Organized our offerings into our Mainframe Solutions, Enterprise Solutions and Services operating segments. This new reporting
disaggregates our operations into two software segments and one services segment.
In January 2012, our Board of Directors approved a capital allocation program that targets the return of up to $2.5 billion to
shareholders through fiscal 2014. This includes an increase in the annual dividend from $0.20 to $1.00 per share on our common
stock as and when declared by the Board of Directors and the authorization to acquire up to $1.5 billion of our common stock.
CA Technologies Business Model
We generate revenue from the following sources: license fees — licensing our products on a right-to-use basis; maintenance fees —
providing customer technical support and product enhancements; and service fees — providing professional services such as product
implementation, consulting and education. The timing and amount of fees recognized as revenue during a reporting period are
determined in accordance with generally accepted accounting principles in the United States of America (GAAP). Revenue is
reported net of applicable sales taxes.
Under our business model, we offer customers a wide range of licensing options. For traditional, on-premises licensing, we typically
license to customers either perpetually or on a subscription basis for a specified term. Our customers also purchase maintenance and
support services that provide technical support and any product enhancements released during the maintenance period.
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