Computer Associates 2012 Annual Report Download - page 41

Amortization of Capitalized Software Costs
Amortization of capitalized software costs consists of the amortization of both purchased software and internally generated
capitalized software development costs. Internally generated capitalized software development costs relate to new products and
significant enhancements to existing software products that have reached the technological feasibility stage.
For fiscal 2012, amortization of capitalized software costs increased compared with fiscal 2011, primarily due to the increase in
projects that reached general availability in recent periods and amortization associated with technology acquired from our recent
acquisitions.
For fiscal 2011, amortization of capitalized software costs increased compared with fiscal 2010, primarily due to the increase in
amortization expense associated with assets acquired from our fiscal 2011 and fiscal 2010 acquisitions and the increase in projects
that reached general availability in recent periods.
Selling and Marketing
Selling and marketing expenses include the costs relating to our sales force, channel partners, corporate and business marketing and
sales training programs. The increase in selling and marketing expenses for fiscal 2012 compared with fiscal 2011 was primarily due
to an increase in personnel-related costs of $114 million, which includes $16 million of costs associated with our recent acquisitions
and an unfavorable foreign exchange effect of $13 million compared with fiscal 2011. The increase in personnel-related costs also
includes severance costs of $22 million associated with our fiscal 2012 workforce reduction plan (Fiscal 2012 Plan). In addition,
commission expenses increased $12 million for fiscal 2012 compared with fiscal 2011. These increases were partially offset by a $28
million decrease in promotional and travel costs for fiscal 2012 compared with fiscal 2011.
The increase in selling and marketing expenses for fiscal 2011 compared with fiscal 2010 was primarily due to an increase in
personnel-related costs of $46 million, of which $22 million primarily related to costs associated with our fiscal 2011 and 2010
acquisitions. Promotional and travel costs increased by $39 million, primarily due to $20 million of costs associated with CA World,
our user conference, and our re-branding initiative. CA World occurred in the first quarter of fiscal 2011 and is our largest periodic
promotional and marketing event that takes place approximately every 18 months. Included in the promotional and travel cost
increase is $10 million of additional expenses that were associated with our fiscal 2011 and fiscal 2010 acquisitions. A portion of the
increase in personnel and promotion costs is associated with our continued investment in Growth Markets and emerging geographies.
General and Administrative
General and administrative expenses include the costs of corporate and support functions, including our executive leadership and
administration groups, finance, legal, human resources, corporate communications and other costs such as provisions for doubtful
accounts.
General and administrative expenses for fiscal 2012 compared with fiscal 2011 increased $11 million, primarily due to $14 million of
costs associated with our recent acquisitions and $9 million of severance costs in connection with the actions under our Fiscal 2012
Plan. These increases were partially offset by a decrease in external consulting and personnel-related costs.
The decrease in general and administrative expenses for fiscal 2011 compared with fiscal 2010 was primarily related to a decrease in
personnel-related and office costs of $29 million and consulting costs of $15 million. The decrease in personnel-related expense was
primarily due to lower financial performance attainment levels under our equity and cash compensation plans for fiscal 2011. In fiscal
2010, we incurred costs related to the departure of our Chief Executive Officer and the transition to his successor. These decreases
were offset by increases in personnel costs of $20 million associated with our fiscal 2011 and 2010 acquisitions.
Product Development and Enhancements
For each of fiscal 2012 and fiscal 2011, product development and enhancements expenses represented approximately 11% of total
revenue. The increase in product development and enhancements expenses for fiscal 2012 compared with fiscal 2011 was primarily
due to additional costs incurred to broaden our enterprise solutions product offerings and $8 million of severance costs in connection
with the actions under our Fiscal 2012 Plan.
For fiscal 2011 and fiscal 2010, product development and enhancements expenses represented approximately 11% and 12% of total
revenue, respectively. The decrease in product development and enhancements was primarily due to the costs incurred in the fourth
quarter of fiscal 2010 associated with our fiscal 2010 restructuring plan. This was partially offset by the additional costs incurred
during fiscal 2011 in connection with our investment in technologies to support our growth strategy, as well as a broadening of our
enterprise solutions product offerings.
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