Note 3 – Acquisitions and Divestitures

iSOFT Acquisition

On July 29, 2011, CSC completed the acquisition of iSOFT Group Limited (iSOFT), a publicly-held company listed on the Australian Securities Exchange. iSOFT is a global healthcare information technology company providing advanced application solutions principally to secondary care providers across both the public and private sectors. The acquisition complements and strengthens CSC's software products, healthcare integration and services portfolio, and its healthcare research and development capabilities.

CSC acquired all of the outstanding shares in iSOFT for cash consideration of $200 million, and the assumption of debt of $315 million, of which $298 million was repaid immediately after the acquisition. The acquisition was funded through CSC's existing cash balances. Acquisition costs for the transaction are estimated to be $9 million, and are included in the selling, general and administrative expenses in the Company's consolidated condensed statement of operations for the quarter ended September 30, 2011.

Prior to the acquisition, the Company and iSOFT had a subcontracting agreement related to the development and delivery of software and IT services under the Company's U.K. National Health Service (NHS) contract. The agreement was effectively settled upon the completion of the acquisition. The Company evaluated whether any settlement gain or loss arose due to the settlement of the pre-existing relationship, and preliminarily determined that the subcontract was at market and no settlement gain or loss was recognized.

The results of iSOFT have been included in the Company's consolidated condensed financial statements from the date of acquisition, within its Business Solutions and Services (BSS) segment. During the quarter ended September 30, 2011, iSOFT contributed revenues of $32 million and an operating loss of $27 million, including the effect of purchase accounting adjustments, primarily relating to amortization of intangibles. The operating loss was offset by currency gains of $13 million attributable to inter-company balances included in other income, resulting in an effective pre-tax loss of $14 million. The currency gains resulted from unhedged positions.

The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition of iSOFT had occurred on April 3, 2010, for all periods presented:

	As Reported					Pro Forma
	Quarter Ended					Quarter Ended
Amounts in millions, except per share data	September 30, 2011			October 1, 2010		September 30, 2011			October 1, 2010
Revenue	$	3,966		$	3,935	$	3,981		$	3,978
Net (loss) income attributable to CSC common shareholders		(2,877	)		184		(2,888	)		154
Basic EPS		(18.56	)		1.19		(18.62	)		1.00
Diluted EPS		(18.56	)		1.18		(18.62	)		0.99

	As Reported					Pro Forma
	Six Months Ended					Six Months Ended
Amounts in millions, except per share data	September 30, 2011			October 1, 2010		September 30, 2011			October 1, 2010
Revenue	$	7,999		$	7,845	$	8,077		$	7,938
Net (loss) income attributable to CSC common shareholders		(2,694	)		327		(2,727	)		260
Basic EPS		(17.39	)		2.12		(17.60	)		1.68
Diluted EPS		(17.39	)		2.09		(17.60	)		1.66

The pro forma financial information above is not indicative of the results that would have actually been obtained if the acquisition had occurred on April 3, 2010, or that may be obtained in the future. No effect has been given to cost reductions or operating synergies relating to the integration of iSOFT in the Company's operations. The six months ended September 30, 2011 information has been adjusted to exclude $37 million of goodwill impairment recorded by iSOFT in June 2011 and the six months ended October 1, 2010 information has been adjusted to exclude $290 million of goodwill impairment recorded by iSOFT in June 2010. Additionally, the three and six months ended September 30, 2011, information has been adjusted to exclude the transaction costs of $9 million and the three and six months ended October 1, 2010, information has been adjusted to include the transaction costs of $9 million.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

(Amounts in millions)	Estimated Fair Value
Cash and cash equivalents	$	32
Trade and other receivables		122
Other current assets		11
Deferred tax assets		35
Intangible assets		222
Property and equipment		20
Trade payables and accrued expenses		(54	)
Deferred revenue		(54	)
Current income tax liabilities		(6	)
Debt		(315	)
Deferred tax, uncertain tax positions, and other long-term liabilities		(81	)
Total identifiable net assets acquired		(68	)
Goodwill		268
Total purchase price	$	200

As of the acquisition date, the fair value of receivables approximated book value, which included billed and unbilled receivables and the historical allowance for uncollectible amounts of $10 million. Of the total debt acquired, $298 million was paid off in conjunction with the acquisition.

The components of the intangible assets acquired and their respective estimated useful lives are as follows:

Amounts in millions	Estimated Fair Value		Estimated Useful Lives (Years)
Customer relationships	$	111		10-13
Software		107		5-10
Trade names		4		1
Total intangible assets	$	222

The entire amount of goodwill is associated with the Company's BSS segment, and is attributable to expected increases in the Company's market capabilities, synergies from combining operations, and the value of the acquired workforce. Of the estimated total goodwill, $15 million is estimated to be tax deductible.

As the acquisition occurred during the quarter ended September 30, 2011, the purchase price allocation is still in process, and the allocation shown above is preliminary and based upon estimates which may change as additional information becomes available relative to the determination of the fair value of the assets and liabilities acquired. The Company expects to finalize the purchase price allocation prior to the end of fiscal 2012.

AppLabs Acquisition

On September 13, 2011, CSC acquired AppLabs Technologies Private Limited (AppLabs), a Company headquartered in India which significantly enhances CSC's capabilities in application testing services as well as shortening time-to-market. The AppLabs acquisition will complement CSC's expertise in financial services, healthcare, manufacturing, chemical, energy and natural resources and technology and consumer verticals.

CSC acquired all outstanding shares of AppLabs for cash consideration of $171 million, which was funded through CSC's existing cash balances.

The results of AppLabs have been included in the Company's consolidated financial statements from the date of acquisition. During the quarter ended September 30, 2011, AppLabs contributed revenues of $6 million and no net income, including the effect of purchase accounting adjustments, primarily relating to amortization of intangibles. The pro forma financial information for this acquisition is not presented as this acquisition is not material to CSC's consolidated results.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

(Amounts in millions)	Estimated Fair Value
Cash and cash equivalents	$	4
Trade receivables		20
Other current assets		8
Intangible assets		33
Property and equipment		4
Trade payables and accrued expenses		(27	)
Income tax liabilities and deferred income taxes		(18	)
Other liabilities		(2	)
Total identifiable net assets acquired		22
Goodwill		149
Total purchase price	$	171

As of the acquisition date, the fair value of trade receivables approximated book value and was considered fully recoverable.

The components of the intangible assets acquired and their respective estimated useful lives are as follows:

Amounts in millions	Estimated Fair Value		Estimated Useful Lives (Years)
Customer relationships	$	31		2-8
Software		2		1-5
Total intangible assets	$	33

The entire amount of goodwill is associated with the Company's Managed Services Sector (MSS) segment, and is attributable to expected increases in the Company's market capabilities and the value of the acquired workforce. None of the goodwill is expected to be tax deductible.

As the acquisition occurred near the close of the quarter ended September 30, 2011, the purchase price allocation is still in process, and the allocation shown above is preliminary and based upon estimates which may change as additional information becomes available relative to the determination of the fair value of the assets and liabilities acquired. The Company expects to finalize the purchase price allocation prior to the end of fiscal 2012.

Other Acquisitions

During fiscal 2012, CSC also acquired two small privately held entities for $28 million in all-cash transactions plus additional consideration of up to $2 million contingent on achievement of agreed revenue targets for future periods through the end of May 2014. The acquisitions will enhance CSC's offerings in the healthcare information technology and financial services industries.

The results of the acquired businesses have been included in the Company's consolidated financial statements from the dates of acquisition. The pro forma financial information for these acquisitions is not presented as these acquisitions, both individually and in the aggregate, are not material to CSC's consolidated results.

The purchase prices were allocated to net assets acquired based on preliminary estimates of fair values at the dates of acquisition as: $8 million to current assets, $2 million to property and equipment, $7 million to intangible assets, $6 million to current liabilities and $17 million to goodwill. Identified intangible assets consist primarily of customer related intangibles with useful lives of 4-10 years. Of the $17 million goodwill, $14 million is associated with the Company's North American Public Sector (NPS) segment and $3 million with the BSS segment. The $14 million goodwill associated with the NPS segment is expected to be tax deductible.

Primarily as a result of the short time frame elapsed since acquisition, the allocation of purchase price shown above is preliminary and based upon estimates which may change as additional information becomes available relative to the determination of the fair value of the assets and liabilities acquired. The Company expects to finalize the purchase price allocation prior to the end of fiscal 2012.

During the second quarter of fiscal 2011, CSC acquired two separate, privately-held companies for $61 million in cash. The purchase consideration for the acquisitions was allocated to the net assets acquired and liabilities assumed based on their respective fair values at the dates of acquisition. The total purchase consideration was allocated as $8 million to software, $16 million to acquired intangible assets, $1 million to property and equipment, and $36 million to goodwill. Of the total goodwill, $10 million is associated with CSC's BSS segment and $26 million with the NPS segment.

Pro forma financial statements are not presented as the impact of these acquisitions was immaterial to CSC's consolidated results.

Divestiture

During the second quarter of fiscal 2011, CSC completed the divestiture of an immaterial set of sub-contracts within its NPS segment, whose ultimate customer is the U.S. federal government, for consideration of approximately $56 million. The divestiture was driven by government Organizational Conflict of Interest concerns. Reflecting the divestiture, CSC derecognized net current assets of $18 million, net property and equipment of $1 million, and goodwill of $10 million, and incurred transaction costs of $1 million. The divestiture resulted in a pre-tax gain on discontinued operations of $26 million.