Segment Information

6 Months Ended

Sep. 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 and six months ended September 30, 2014 and 2013 was as follows:

Three Months Ended September 30, 2014	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	610		$	378		$	91		$	1,079
Expenses	234			327			89			650
Segment profit	$	376		$	51		$	2		$	429
Segment operating margin	62		%	13		%	2		%	40		%
Depreciation	$	11		$	7		$	—		$	18

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

(in millions)
Segment profit	$	429
Less:
Purchased software amortization	31
Other intangibles amortization	16
Software development costs capitalized	—
Internally developed software products amortization	44
Share-based compensation expense	22
Other expenses, net (1)	(4		)
Interest expense, net	12
Income from continuing operations before income taxes	$	308

(1) Other expenses, net consists of approximately $12 million of costs associated with the Fiscal 2014 Plan, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs.

Six Months Ended September 30, 2014	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	1,224		$	746		$	178		$	2,148
Expenses	469			652			171			1,292
Segment profit	$	755		$	94		$	7		$	856
Segment operating margin	62		%	13		%	4		%	40		%
Depreciation	$	23		$	14		$	—		$	37

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

(in millions)
Segment profit	$	856
Less:
Purchased software amortization	59
Other intangibles amortization	31
Software development costs capitalized	—
Internally developed software products amortization	83
Share-based compensation expense	42
Other expenses, net (1)	8
Interest expense, net	26
Income from continuing operations before income taxes	$	607

(1) Other expenses, net consists of approximately $21 million of costs associated with the Fiscal 2014 Plan, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs.

Three Months Ended September 30, 2013	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	624		$	384		$	97		$	1,105
Expenses	232			337			88			657
Segment profit	$	392		$	47		$	9		$	448
Segment operating margin	63		%	12		%	9		%	41		%
Depreciation	$	13		$	9		$	—		$	22

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

(in millions)
Segment profit	$	448
Less:
Purchased software amortization	31
Other intangibles amortization	15
Software development costs capitalized	(8		)
Internally developed software products amortization	38
Share-based compensation expense	20
Other expenses, net (1)	7
Interest expense, net	13
Income from continuing operations before income taxes	$	332

(1) Other expenses, net consists of approximately $2 million of costs associated with the Fiscal 2014 Plan, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs.

Six Months Ended September 30, 2013	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	1,243		$	762		$	195		$	2,200
Expenses	475			688			178			1,341
Segment profit	$	768		$	74		$	17		$	859
Segment operating margin	62		%	10		%	9		%	39		%
Depreciation	$	27		$	17		$	—		$	44

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

(in millions)
Segment profit	$	859
Less:
Purchased software amortization	59
Other intangibles amortization	29
Software development costs capitalized	(31		)
Internally developed software products amortization	76
Share-based compensation expense	40
Other expenses, net (1)	122
Interest expense, net	24
Income from continuing operations before income taxes	$	540

(1) Other expenses, net consists of approximately $119 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 September 30,				Six Months Ended September 30,
	2014		2013		2014		2013
	(in millions)
United States	$	656	$	671	$	1,299	$	1,328
EMEA (1)	259		267		518		531
Other	164		167		331		341
Total revenue	$	1,079	$	1,105	$	2,148	$	2,200

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