Segment Information

9 Months Ended

Sep. 30, 2012

Segment Information

e. Segment Information. The company has two business segments: Services and Technology. Revenue classifications by segment are as follows: Services – systems integration and consulting, outsourcing, infrastructure services and core maintenance; Technology – enterprise-class software and servers and other technology.

The accounting policies of each business segment are the same as those followed by the company as a whole. Intersegment sales and transfers are priced as if the sales or transfers were to third parties. Accordingly, the Technology segment recognizes intersegment revenue and manufacturing profit on hardware and software shipments to customers under Services contracts. The Services segment, in turn, recognizes customer revenue and marketing profits on such shipments of company hardware and software to customers. The Services segment also includes the sale of hardware and software products sourced from third parties that are sold to customers through the company’s Services channels. In the company’s consolidated statements of income, the manufacturing costs of products sourced from the Technology segment and sold to Services customers are reported in cost of revenue for Services.

Also included in the Technology segment’s sales and operating profit are sales of hardware and software sold to the Services segment for internal use in Services engagements. The amount of such profit included in operating income of the Technology segment for the three months ended September 30, 2012 and 2011 was $.4 million and $.7 million, respectively. The amount for the nine months ended September 30, 2012 and 2011 was $9.8 million and $5.4 million, respectively. The profit on these transactions is eliminated in Corporate.

The company evaluates business segment performance on operating income exclusive of pension income or expense, restructuring charges and unusual and nonrecurring items, which are included in Corporate. All other corporate and centrally incurred costs are allocated to the business segments based principally on revenue, employees, square footage or usage.

A summary of the company’s operations by business segment for the three and nine month periods ended September 30, 2012 and 2011 is presented below (in millions of dollars):

	Total		Corporate			Services		Technology
Three Months Ended Sept. 30, 2012
Customer revenue	$	877.4				$	748.0	$	129.4
Intersegment			$	(16.2	)		.6		15.6
Total revenue	$	877.4	$	(16.2	)	$	748.6	$	145.0
Operating income	$	61.2	$	(25.8	)	$	44.8	$	42.2
Three Months Ended Sept. 30, 2011
Customer revenue	$	1,020.1				$	876.3	$	143.8
Intersegment			$	(26.4	)		.9		25.5
Total revenue	$	1,020.1	$	(26.4	)	$	877.2	$	169.3
Operating income	$	113.0	$	(6.6	)	$	75.9	$	43.7
Nine Months Ended Sept. 30, 2012
Customer revenue	$	2,727.1				$	2,386.7	$	340.4
Intersegment			$	(85.8	)		2.0		83.8
Total revenue	$	2,727.1	$	(85.8	)	$	2,388.7	$	424.2
Operating income	$	204.6	$	(64.6	)	$	151.2	$	118.0
Nine Months Ended Sept. 30, 2011
Customer revenue	$	2,868.5				$	2,519.3	$	349.2
Intersegment			$	(70.2	)		2.7		67.5
Total revenue	$	2,868.5	$	(70.2	)	$	2,522.0	$	416.7
Operating income	$	203.0	$	(26.1	)	$	168.2	$	60.9

Presented below is a reconciliation of total business segment operating income to consolidated income before income taxes (in millions of dollars):

	Three Months						Nine Months
	Ended Sept. 30						Ended Sept. 30
	2012			2011			2012			2011
Total segment operating income	$	87.0		$	119.6		$	269.2		$	229.1
Interest expense		(7.8	)		(12.5	)		(25.0	)		(51.7	)
Other income (expense), net		(25.8	)		16.6			(34.9	)		(56.6	)
Corporate and eliminations		(25.8	)		(6.6	)		(64.6	)		(26.1	)
Total income before income taxes	$	27.6		$	117.1		$	144.7		$	94.7

Customer revenue by classes of similar products or services, by segment, is presented below (in millions of dollars):

	Three Months				Nine Months
	Ended Sept. 30				Ended Sept. 30
	2012		2011		2012		2011
Services
Systems integration and consulting	$	230.6	$	305.8	$	801.9	$	876.7
Outsourcing		363.3		391.2		1,110.9		1,112.6
Infrastructure services		107.1		124.1		330.0		364.1
Core maintenance		47.0		55.2		143.9		165.9
		748.0		876.3		2,386.7		2,519.3
Technology
Enterprise-class software and servers		123.5		123.4		320.0		302.6
Other technology		5.9		20.4		20.4		46.6
		129.4		143.8		340.4		349.2
Total	$	877.4	$	1,020.1	$	2,727.1	$	2,868.5

Geographic information about the company’s revenue, which is principally based on location of the selling organization, is presented below (in millions of dollars):

	Three Months				Nine Months
	Ended Sept. 30				Ended Sept. 30
	2012		2011		2012		2011
United States	$	344.0	$	452.8	$	1,094.3	$	1,177.0
United Kingdom		114.2		100.8		325.5		299.7
Other international		419.2		466.5		1,307.3		1,391.8
Total	$	877.4	$	1,020.1	$	2,727.1	$	2,868.5