Segment Information

6 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

SEGMENT INFORMATION

NOTE O – SEGMENT INFORMATION

The Company’s Mainframe Solutions and Enterprise Solutions operating segments comprise its software business organized by the nature of the Company’s software offerings and the product hierarchy in which the platform operates. The Services operating segment comprises implementation, consulting, education and training services, including those directly related to the Mainframe Solutions and Enterprise Solutions software that the Company sells to its customers. A measure of segment assets is not currently provided to the Company’s Chief Executive Officer and has therefore not been disclosed.

As part of the Company’s efforts to more fully utilize its intellectual property assets, in the first quarter of fiscal 2013, the Company closed a transaction that assigned the rights to certain of these assets to a large technology company for $35 million. The entire contract amount is included in the Enterprise Solutions segment for the six months ended September 30, 2012. The Company will continue to have the ability to use these intellectual property assets in current and future product offerings.

During the second quarter of fiscal 2012, the Company incurred severance costs associated with the Fiscal 2012 Plan, of which $23 million, $20 million and $1 million were assigned to the Mainframe Solutions, Enterprise Solutions and Services segments, respectively.  Refer to Note C, “Severance and Exit Costs.”

The Company’s segment information for the three and six months ended September 30, 2012 and 2011 is as follows:

Three Months Ended September 30, 2012	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	619		$	438		$	95		$	1,152
Expenses	247			410			89			746
Segment profit	$	372		$	28		$	6		$	406
Segment operating margin	60		%	6		%	6		%	35		%
Depreciation and amortization	$	27		$	40		$	—		$	67

Reconciliation of segment profit to income from continuing operations before income taxes for the three months ended September 30, 2012:

Segment profit	$	406
Less:
Purchased software amortization	27
Other intangibles amortization	13
Share-based compensation expense	21
Other (gains) expenses, net (1)	8
Interest expense, net	10
Income from continuing operations before income taxes	$	327

(1) Other (gains) expenses, net consists of other unallocated costs including foreign exchange derivative (gains) losses, and other miscellaneous costs.

Six Months Ended September 30, 2012	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	1,247		$	864		$	186		$	2,297
Expenses	507			769			176			1,452
Segment profit	$	740		$	95		$	10		$	845
Segment operating margin	59		%	11		%	5		%	37		%
Depreciation and amortization	$	53		$	78		$	—		$	131

Reconciliation of segment profit to income from continuing operations before income taxes for the six months ended September 30, 2012:

Segment profit	$	845
Less:
Purchased software amortization	54
Other intangibles amortization	27
Share-based compensation expense	44
Other (gains) expenses, net (1)	2
Interest expense, net	21
Income from continuing operations before income taxes	$	697

(1) Other (gains) expenses, net consists of other unallocated costs including foreign exchange derivative (gains) losses, and other miscellaneous costs.

Three Months Ended September 30, 2011	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	655		$	449		$	96		$	1,200
Expenses	308			422			92			822
Segment profit	$	347		$	27		$	4		$	378
Segment operating margin	53		%	6		%	4		%	32		%
Depreciation and amortization	$	25		$	32		$	—		$	57

Reconciliation of segment profit to income from continuing operations before income taxes for the three months ended September 30, 2011:

Segment profit	$	378
Less:
Purchased software amortization	26
Other intangibles amortization	15
Share-based compensation expense	16
Other (gains) expenses, net (1)	(12		)
Interest expense, net	6
Income from continuing operations before income taxes	$	327

(1) Other (gains) expenses, net consists of other unallocated costs including foreign exchange derivative (gains) losses, and other miscellaneous costs.

Six Months Ended September 30, 2011	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	1,301		$	876		$	186		$	2,363
Expenses	584			804			180			1,568
Segment profit	$	717		$	72		$	6		$	795
Segment operating margin	55		%	8		%	3		%	34		%
Depreciation and amortization	$	49		$	63		$	—		$	112

Reconciliation of segment profit to income from continuing operations before income taxes for the six months ended September 30, 2011:

Segment profit	$	795
Less:
Purchased software amortization	49
Other intangibles amortization	34
Share-based compensation expense	41
Other (gains) expenses, net (1)	(4		)
Interest expense, net	15
Income from continuing operations before income taxes	$	660

(1) Other (gains) expenses, net consists of other unallocated costs including foreign exchange derivative (gains) losses, and other miscellaneous costs.

The table below summarizes the Company’s revenue from the United States and from international (i.e., non-U.S.) locations:

(in millions)	Three Months Ended September 30, 2012		Six Months Ended September 30, 2012		Three Months Ended September 30, 2011		Six Months Ended September 30, 2011
United States	$	685	$	1,368	$	690	$	1,362
Europe	266		538		302		600
Other	201		391		208		401
Total revenue	$	1,152	$	2,297	$	1,200	$	2,363