Segment Information

3 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

SEGMENT INFORMATION

NOTE O – SEGMENT INFORMATION

The Company’s Mainframe Solutions and Enterprise Solutions segments comprise its software business organized by the nature of the Company’s software offerings and the platform on which the products operate. The Services segment comprises product implementation, consulting, customer education and customer training, including those directly related to the Mainframe Solutions and Enterprise Solutions software that the Company sells to its customers.

Segment expenses do not include share-based compensation expense; amortization of purchased software; amortization of other intangible assets; certain foreign exchange derivative hedging gains and losses; costs associated with the Company's Fiscal 2014 Plan; and other miscellaneous costs. The Company considers all costs of internally developed software as segment expense in the period the costs are incurred and as a result, the Company will add back capitalized internal software costs and exclude amortization of internally developed software costs previously capitalized from segment expenses. A measure of segment assets is not currently provided to the Company’s Chief Executive Officer and has therefore not been disclosed.

The Company’s segment information for the three months ended June 30, 2014 and 2013 was as follows:

Three Months Ended June 30, 2014	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	614		$	368		$	87		$	1,069
Expenses	235			325			82			642
Segment profit	$	379		$	43		$	5		$	427
Segment operating margin	62		%	12		%	6		%	40		%
Depreciation	$	12		$	7		$	—		$	19

Reconciliation of segment profit to income from continuing operations before income taxes for the three months ended June 30, 2014:

(in millions)
Segment profit	$	427
Less:
Purchased software amortization	28
Other intangibles amortization	15
Software development costs capitalized	—
Internally developed software products amortization	39
Share-based compensation expense	20
Other expenses, net (1)	12
Interest expense, net	14
Income from continuing operations before income taxes	$	299

(1) Other expenses, net consists of approximately $9 million of costs associated with the Fiscal 2014 Plan, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs.

Three Months Ended June 30, 2013	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	619		$	378		$	98		$	1,095
Expenses	243			351			90			684
Segment profit	$	376		$	27		$	8		$	411
Segment operating margin	61		%	7		%	8		%	38		%
Depreciation	$	14		$	8		$	—		$	22

Reconciliation of segment profit to income from continuing operations before income taxes for the three months ended June 30, 2013:

(in millions)
Segment profit	$	411
Less:
Purchased software amortization	28
Other intangibles amortization	14
Software development costs capitalized	(23		)
Internally developed software products amortization	38
Share-based compensation expense	20
Other expenses, net (1)	115
Interest expense, net	11
Income from continuing operations before income taxes	$	208

(1) Other expenses, net consists of approximately $117 million of costs associated with the Fiscal 2014 Plan, certain foreign exchange derivative hedging gains and 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:

	Three Months Ended June 30,
	2014		2013
	(in millions)
United States	$	643	$	657
EMEA (1)	259		264
Other	167		174
Total revenue	$	1,069	$	1,095

(1) Consists of Europe, the Middle East and Africa.