Computer Associates 2012 Annual Report Download - page 39

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Revenue
As more fully described below, total revenue increased in fiscal 2012 compared with fiscal 2011 and in fiscal 2011 compared with
fiscal 2010. During fiscal 2012, total revenue reflected a favorable foreign exchange effect of $89 million compared with fiscal 2011.
The foreign exchange effect for fiscal 2011 compared with fiscal 2010 was not material.
Subscription and Maintenance Revenue
Subscription and maintenance revenue is the amount of revenue recognized ratably during the reporting period from: (i) subscription
license agreements that were in effect during the period, generally including maintenance that is bundled with and not separately
identifiable from software usage fees or product sales, (ii) maintenance agreements associated with providing customer technical
support and access to software fixes and upgrades that are separately identifiable from software usage fees or product sales, and
(iii) license agreements bundled with additional products, maintenance or professional services for which VSOE has not been
established. These amounts include the sale of products directly by us, as well as by distributors and volume partners, value-added
resellers and exclusive representatives to end-users, where the contracts incorporate the right for end-users to receive unspecified
future software products, and other contracts entered into in close proximity or contemplation of such agreements.
The increase in subscription and maintenance revenue for fiscal 2012 compared with fiscal 2011 was primarily due to revenue
associated with a five-year license agreement with a large IT outsourcer for approximately $500 million that was executed in the
fourth quarter of fiscal 2011. In addition, for fiscal 2012, there was a favorable foreign exchange effect of $79 million compared with
fiscal 2011.
The increase in subscription and maintenance revenue for fiscal 2011 compared with fiscal 2010 was primarily due to revenue
associated with our fiscal 2010 acquisitions of NetQoS, Inc. and Nimsoft AS (both of which occurred during the second half of fiscal
2010). For fiscal 2011, revenue reflected a favorable foreign exchange effect of less than $1 million.
Professional Services
Professional services revenue primarily includes product implementation, consulting, customer training and customer education.
Professional services revenue increased in fiscal 2012 compared with fiscal 2011, primarily due to our fiscal 2012 acquisition of Base
Technologies.
The professional services revenue increase in fiscal 2011 compared with fiscal 2010 was primarily due to the increased number of
engagements under service contracts.
Software Fees and Other
Software fees and other revenue primarily consists of revenue that is recognized on an up-front basis. This includes revenue
associated with enterprise solutions products sold on an up-front basis directly by our sales force or through transactions with
distributors and volume partners, value-added resellers and exclusive representatives (sometimes referred to as our “indirect” or
“channel” revenue). It also includes our SaaS revenue, which is recognized as the services are provided rather than up-front.
In fiscal 2012, there was a year-over-year increase in sales associated with our perpetual enterprise solutions products of $65 million,
of which $31 million was for products that were newly eligible for up-front revenue recognition in the second half of fiscal 2012 and
$13 million was associated with our acquisition of ITKO. In addition, there was an increase of $34 million in revenue from our SaaS
offerings.
During the third quarter of fiscal 2012, we recognized $39 million in revenue under a license agreement we entered into in connection
with a litigation settlement with Rocket Software, Inc. (Rocket) during fiscal 2009 that resolved our claims against Rocket for
copyright infringement and trade secret misappropriation. Rocket did not admit any wrongdoing in connection with this settlement.
As part of this settlement, Rocket agreed to license technology from us, including source code authored several years ago and related
trade secrets that were the subject of the litigation. The amount received during the third quarter of fiscal 2012 reflects the final
amount owed to us, which was not scheduled to be paid in full until fiscal 2014 (Final License Payment). Rocket paid this amount in
advance at their discretion, unsolicited by us and without any discount or concession by us.
Software fees and other revenue increased for fiscal 2011 compared with fiscal 2010 primarily due to $48 million in revenue from
service assurance technologies associated with the NetQoS acquisition (which occurred during the second half of fiscal 2010) that
were successfully integrated into our existing product portfolio, $36 million from existing application management products sold on
an up-front basis and $27 million from our SaaS offerings from a recent acquisition and other organic technologies sold as SaaS.
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