BUSINESS SEGMENT INFORMATION

During the fiscal year ended January 31, 2012, the Company changed its reportable segments. The Company's reportable segments now consist of Comverse BSS, Comverse VAS, and Verint. The results of operations of all the other operations of the Company are included in the column captioned “All Other” as part of the Company's business segment presentation. The operating segments included in “All Other” do not meet the quantitative thresholds required for a separate presentation or the aggregation criteria under segment reporting guidance. Specifically, they do not have similar economic characteristics with any separately presented reportable segment.

The changes in reportable segments are attributable to the implementation of the Phase II Business Transformation at Comverse that focuses on process reengineering to maximize business performance, productivity and operational efficiency. For a more comprehensive discussion relating to the Phase II Business Transformation, see Note 11, Restructuring. As part of the Phase II Business Transformation, Comverse restructured its operations into new business units that are designed to improve operational efficiency and business performance.

The Company has recast the presentation of its segment information for the fiscal years ended January 31, 2011 and 2010 to reflect these reportable segments. For a more comprehensive discussion relating to the changes in the Company's reportable segments, see Note 1, Organization, Business, and Summary of Significant Accounting Policies.

Segment Performance

The Company evaluates its business by assessing the performance of each of its operating segments. CTI's Chief Executive Officer is its chief operating decision maker (“CODM”). The CODM uses segment performance, as defined below, as the primary basis for assessing the financial results of the operating segments and for the allocation of resources. Segment performance, as the Company defines it in accordance with the FASB's guidance relating to segment reporting, is not necessarily comparable to other similarly titled captions of other companies. Segment performance, as defined by management, represents operating results of a segment without the impact of significant expenditures incurred by the segment in connection with the efforts to become or remain current in periodic reporting obligations under the federal securities laws which are expected to be eliminated over time, certain non-cash charges, and certain other gains and charges.

Segment performance is computed by management as income (loss) from operations adjusted for the following: (i) stock-based compensation expense; (ii) amortization of acquisition-related intangibles; (iii) compliance-related professional fees; (iv) compliance-related compensation and other expenses; (v) strategic evaluation related costs; (vi) impairment of property and equipment (vii) impairment charges; (viii) litigation settlements and related costs; (ix) acquisition-related charges; (x) restructuring and integration charges; and (xi) certain other gains and charges. Compliance-related professional fees and compliance-related compensation and other expenses relate to fees and expenses incurred in connection with the Company's efforts to (a) complete current and previously issued financial statements and audits of such financial statements, (b) become current in its periodic reporting obligations under the federal securities laws, and (c) remediate material weaknesses in internal control over financial reporting. Compliance-related professional fees and compliance-related compensation and other expenses recorded for the fiscal year ended January 31, 2012 also relate to fees and expenses incurred in connection with the timely filing of certain periodic reports which fees and expenses are expected to be eliminated over time as the Company enhances its internal finance and accounting personnel to replace external consultants currently assisting it in the preparation of periodic reports. Strategic evaluation related costs include financial advisory, accounting, tax, consulting and legal fees incurred in connection with our evaluation of strategic alternatives, including the proposed Comverse share distribution.

In evaluating each segment's performance, management uses segment revenue, which consists of revenue generated by the segment, including intercompany revenue. Certain segment performance adjustments relate to expenses included in the calculation of income (loss) from operations, while, from time to time, certain segment performance adjustments may be presented as adjustments to revenue. In calculating Verint's segment performance for the fiscal year ended January 31, 2012, the presentation of segment revenue gives effect to segment revenue adjustments that represent the impact of fair value adjustments required under the FASB's guidance relating to acquired customer support contracts that would have otherwise been recognized as revenue on a stand-alone basis with respect to acquisitions consummated by Verint during the periods presented. Verint did not have segment revenue adjustments for the fiscal years ended January 31, 2011 and 2010.

The tables below present information about total revenue, total costs and expenses, income (loss) from operations, interest expense, depreciation and amortization, other non-cash items, and segment performance for the fiscal years ended January 31, 2012, 2011 and 2010:



	Comverse BSS			Comverse VAS			Verint			All Other			Eliminations			Consolidation
	(In thousands)
Fiscal Year Ended January 31, 2012:
Revenue	$	365,008		$	356,413		$	782,648		$	90,328		$	—		$	1,594,397
Intercompany revenue	—			—			—			4,457			(4,457		)	—
Total revenue	$	365,008		$	356,413		$	782,648		$	94,785		$	(4,457	)	$	1,594,397
Total costs and expenses	$	287,913		$	232,477		$	696,170		$	355,350		$	(4,548	)	$	1,567,362
Income (loss) from operations	$	77,095		$	123,936		$	86,478		$	(260,565	)	$	91		$	27,035
Computation of segment performance:
Total revenue	$	365,008		$	356,413		$	782,648		$	94,785
Segment revenue adjustment	—			—			13,599			—
Segment revenue	$	365,008		$	356,413		$	796,247		$	94,785
Total costs and expenses	$	287,913		$	232,477		$	696,170		$	355,350
Segment expense adjustments:
Stock-based compensation expense	—			—			27,910			9,123
Amortization of acquisition-related intangibles	17,308			—			35,302			—
Compliance-related professional fees	—			—			1,012			36,186
Compliance-related compensation and other expenses	2,203			1,789			—			2,727
Strategic evaluation related costs	—			—			—			11,144
Impairment of property and equipment	170			238			—			1,923
Litigation settlements and related costs	—			—			—			5,772
Acquisition-related charges	—			—			9,061			—
Restructuring and integration charges	—			—			—			20,728
Other	—			—			3,190			(31		)
Segment expense adjustments	19,681			2,027			76,475			87,572
Segment expenses	268,232			230,450			619,695			267,778
Segment performance	$	96,776		$	125,963		$	176,552		$	(172,993	)

Interest expense	$	—		$	—		$	(32,358	)	$	(974	)	$	—		$	(33,332	)
Depreciation and amortization	$	(20,609	)	$	(4,707	)	$	(53,040	)	$	(9,726	)	$	—		$	(88,082	)
Other non-cash items ⁽¹⁾	$	(170	)	$	(238	)	$	(270	)	$	(1,923	)	$	—		$	(2,601	)


(1)	Other non-cash items consist of write-downs of property and equipment and capitalized software.



	Comverse BSS			Comverse VAS			Verint			All Other			Eliminations			Consolidated
	(In thousands)
Fiscal Year Ended January 31, 2011:
Revenue	$	340,502		$	460,899		$	726,799		$	95,227		$	—		$	1,623,427
Intercompany revenue	—			—			—			3,409			(3,409		)	—
Total revenue	$	340,502		$	460,899		$	726,799		$	98,636		$	(3,409	)	$	1,623,427
Total costs and expenses	$	284,148		$	285,572		$	653,694		$	454,570		$	(4,642	)	$	1,673,342
Income (loss) from operations	$	56,354		$	175,327		$	73,105		$	(355,934	)	$	1,233		$	(49,915	)
Computation of segment performance:
Total revenue	$	340,502		$	460,899		$	726,799		$	98,636
Segment revenue adjustment	—			—			—			—
Segment revenue	$	340,502		$	460,899		$	726,799		$	98,636
Total costs and expenses	$	284,148		$	285,572		$	653,694		$	454,570
Segment expense adjustments:
Stock-based compensation expense	—			—			46,819			10,579
Amortization of acquisition-related intangibles	18,505			—			30,554			—
Compliance-related professional fees	—			—			28,913			132,804
Compliance-related compensation and other expenses	1,557			330			—			2,700
Strategic evaluation related costs	—			—			—			3,065
Litigation settlements and related costs	—			—			—			(17,060		)
Acquisition-related charges	—			—			1,690			—
Restructuring and integration charges	—			—			—			29,934
Gain on sale of land	—			—			—			(2,371		)
Other	—			—			3,505			(1,402		)
Segment expense adjustments	20,062			330			111,481			158,249
Segment expenses	264,086			285,242			542,213			296,321
Segment performance	$	76,416		$	175,657		$	184,586		$	(197,685	)

Interest expense	$	—		$	—		$	(29,896	)	$	(917	)	$	—		$	(30,813	)
Depreciation and amortization	$	(23,402	)	$	(5,505	)	$	(48,951	)	$	(10,734	)	$	—		$	(88,592	)
Other non-cash items ⁽¹⁾	$	—		$	—		$	(334	)	$	(923	)	$	—		$	(1,257	)


(1)	Other non-cash items consist of write-downs of property and equipment.



	Comverse BSS			Comverse VAS			Verint			All Other			Eliminations			Consolidated
	(In thousands)
Fiscal Year Ended January 31, 2010:
Revenue	$	349,089		$	384,890		$	703,633		$	96,325		$	—		$	1,533,937
Intercompany revenue	—			75			—			1,879			(1,954		)	—
Total revenue	$	349,089		$	384,965		$	703,633		$	98,204		$	(1,954	)	$	1,533,937
Total costs and expenses	$	304,924		$	291,217		$	637,954		$	497,835		$	(4,892	)	$	1,727,038
Income (loss) from operations	$	44,165		$	93,748		$	65,679		$	(399,631	)	$	2,938		$	(193,101	)
Computation of segment performance:
Total revenue	$	349,089		$	384,965		$	703,633		$	98,204
Segment revenue adjustment	—			—			—			—
Segment revenue	$	349,089		$	384,965		$	703,633		$	98,204
Total costs and expenses	$	304,924		$	291,217		$	637,954		$	497,835
Segment expense adjustments:
Stock-based compensation expense	—			—			44,237			13,428
Amortization of acquisition-related intangibles	18,672			—			30,289			3,286
Compliance-related professional fees	—			—			54,472			129,167
Compliance-related compensation and other expenses	2,879			2,462			—			5,396
Strategic evaluation related costs	—			—			—			236
Impairment charges	—			—			—			3,356
Impairment of property and equipment	—			—			—			2,906
Litigation settlements and related costs	—			—			—			2,771
Acquisition-related charges	54			—			762			(157		)
Restructuring and integration charges	—			—			141			15,400
Other	—			—			39			2,590
Segment expense adjustments	21,605			2,462			129,940			178,379
Segment expenses	283,319			288,755			508,014			319,456
Segment performance	$	65,770		$	96,210		$	195,619		$	(221,252	)

Interest expense	$	—		$	—		$	(24,964	)	$	(417	)	$	—		$	(25,381	)
Depreciation and amortization	$	(23,737	)	$	(10,058	)	$	(49,290	)	$	(18,104	)	$	—		$	(101,189	)
Other non-cash items ⁽¹⁾	$	—		$	—		$	(159	)	$	(9,621	)	$	—		$	(9,780	)


(1)	Other non-cash items consist of write-downs and impairments of intangible assets and property and equipment.

The Company does not maintain balance sheets for the Comverse BSS, Comverse VAS and Comverse MI operating segments and therefore is unable to present total assets for Comverse BSS, Comverse VAS and All Other. As of January 31, 2012, 2011 and 2010, total assets of CTI and its Comverse, Verint and Starhome subsidiaries were as follows:



	January 31,
	2012		2011		2010
	(In thousands)
CTI	$	1,428,651	$	1,562,989	$	1,396,781
Comverse	850,106		1,016,625		1,282,707
Verint	1,568,196		1,441,424		1,461,818
Starhome	43,009		37,235		27,677

These amounts do not reflect intercompany eliminations.

Supplemental Financial Information

As discussed above, the Company revised its reportable segments as a result of the implementation of the Phase II Business Transformation at Comverse and the manner in which its CODM reviews the financial results of Comverse and allocates resources to the Company's operating segments. The Company is providing the following additional information, presenting the results of operations of the previous Comverse reportable segment. The Company believes that such presentation provides useful information to investors regarding the performance of the Company's Comverse subsidiary, including comparability to previously reported financial information. The additional information provided is not a replacement for or a subset of the business segment information presented above. The results of operations presented in the column below under “Comverse Other” relate to all the operations of the Company's Comverse subsidiary, other than the Company's Comverse BSS and Comverse VAS reportable segments and include the Comverse MI operating segment, Comverse's Netcentrex operations and Comverse's global corporate functions that support its business units. The information presented for “Comverse Other” includes unallocated global corporate function costs that are consistent with prior internal allocation practices. The results of operations of “Comverse Other” are included in the Company's “All Other” column.

Comverse performance represents the operating results of the Company's Comverse subsidiary without the impact of significant expenditures incurred by Comverse in connection with the efforts to become or remain current in periodic reporting obligations under the federal securities laws which are expected to be eliminated over time as the Company enhances its internal finance and accounting personnel to replace external consultants currently assisting it in the preparation of periodic reports, certain non-cash charges, and certain other gains and charges.



	Comverse BSS			Comverse VAS			Comverse Other			Total
	(In thousands)
Fiscal Year Ended January 31, 2012:
Revenue	$	365,008		$	356,413		$	46,638		$	768,059
Intercompany revenue	—			—			3,098			3,098
Total revenue	$	365,008		$	356,413		$	49,736		$	771,157
Total costs and expenses	$	287,913		$	232,477		$	239,325		$	759,715
Income (loss) from operations	$	77,095		$	123,936		$	(189,589	)	$	11,442
Computation of Comverse performance:
Total revenue	$	365,008		$	356,413		$	49,736		$	771,157
Total costs and expenses	$	287,913		$	232,477		$	239,325		$	759,715
Expense adjustments:
Stock-based compensation expense	—			—			3,660			3,660
Amortization of acquisition-related intangibles	17,308			—			—			17,308
Compliance-related professional fees	—			—			10,901			10,901
Compliance-related compensation and other expenses	2,203			1,789			2,727			6,719
Impairment of property and equipment	170			238			1,923			2,331
Litigation settlements and related costs	—			—			804			804
Restructuring and integration charges	—			—			20,728			20,728
Other	—			—			(48		)	(48		)
Expense adjustments	19,681			2,027			40,695			62,403
Expense after adjustments										697,312
Comverse performance										$	73,845
Interest expense	$	—		$	—		$	(953	)	$	(953	)
Depreciation and amortization	$	(20,609	)	$	(4,707	)	$	(8,849	)	$	(34,165	)
Other non-cash items ⁽¹⁾	$	(170	)	$	(238	)	$	(1,923	)	$	(2,331	)


(1)	Other non-cash items consist of write-downs of property and equipment.



	Comverse BSS			Comverse VAS			Comverse Other			Total
	(In thousands)
Fiscal Year Ended January 31, 2011:
Revenue	$	340,502		$	460,899		$	58,831		$	860,232
Intercompany revenue	—			—			2,604			2,604
Total revenue	$	340,502		$	460,899		$	61,435		$	862,836
Total costs and expenses	$	284,148		$	285,572		$	352,892		$	922,612
Income (loss) from operations	$	56,354		$	175,327		$	(291,457	)	$	(59,776	)
Computation of Comverse performance:
Total revenue	$	340,502		$	460,899		$	61,435		$	862,836
Total costs and expenses	$	284,148		$	285,572		$	352,892		$	922,612
Expense adjustments:
Stock-based compensation expense	—			—			2,439			2,439
Amortization of acquisition-related intangibles	18,505			—			—			18,505
Compliance-related professional fees	—			—			82,136			82,136
Compliance-related compensation and other expenses	1,557			330			2,655			4,542
Restructuring and integration charges	—			—			29,934			29,934
Gain on sale of land	—			—			(2,371		)	(2,371		)
Other	—			—			(1,402		)	(1,402		)
Expense adjustments	20,062			330			113,391			133,783
Expenses after adjustments										788,829
Comverse performance										$	74,007
Interest expense	$	—		$	—		$	(900	)	$	(900	)
Depreciation and amortization	$	(23,402	)	$	(5,505	)	$	(9,798	)	$	(38,705	)
Other non-cash items ⁽¹⁾	$	—		$	—		$	(923	)	$	(923	)


(1)	Other non-cash items consist of write-downs of property and equipment.



	Comverse BSS			Comverse VAS			Comverse Other			Total
	(In thousands)
Fiscal Year Ended January 31, 2010:
Revenue	$	349,089		$	384,890		$	59,015		$	792,994
Intercompany revenue	—			75			1,718			1,793
Total revenue	$	349,089		$	384,965		$	60,733		$	794,787
Total costs and expenses	$	304,924		$	291,217		$	412,862		$	1,009,003
Income (loss) from operations	$	44,165		$	93,748		$	(352,129	)	$	(214,216	)
Computation of Comverse performance:
Total revenue	$	349,089		$	384,965		$	60,733		$	794,787
Total costs and expenses	$	304,924		$	291,217		$	412,862		$	1,009,003
Expense adjustments:
Stock-based compensation expense	—			—			4,170			4,170
Amortization of acquisition-related intangibles	18,672			—			3,286			21,958
Compliance-related professional fees	—			—			113,306			113,306
Compliance-related compensation and other expenses	2,879			2,462			5,396			10,737
Impairment charges	—			—			3,356			3,356
Impairment of property and equipment	—			—			2,906			2,906
Acquisition-related charges	54			—			(157		)	(103		)
Restructuring and integration charges	—			—			15,272			15,272
Other	—			—			831			831
Expense adjustments	21,605			2,462			148,366			172,433
Expenses after adjustments										836,570
Comverse performance										$	(41,783	)
Interest expense	$	—		$	—		$	(314	)	$	(314	)
Depreciation and amortization	$	(23,737	)	$	(10,058	)	$	(16,842	)	$	(50,637	)
Other non-cash items ⁽¹⁾	$	—		$	—		$	(9,109	)	$	(9,109	)


(1)	Other non-cash items consist of write-downs and impairments of intangible assets and property and equipment.

Revenue by major geographical region is based upon the geographic location of the customers who purchase the Company’s products and services. The geographical locations of distributors, resellers and systems integrators who purchase products and utilize the Company’s services may be different from the geographical locations of end customers. Revenue by geographic region and revenue by geographic region as a percentage of total revenue, for the fiscal years ended January 31, 2012, 2011 and 2010 was as follows:



	Fiscal Years Ended January 31,
	2012				2011				2010
	(Dollars in thousands)
United States	$	436,380	27	%	$	481,370	30	%	$	459,844	30	%
United Kingdom	86,250		5	%	104,281		6	%	80,516		5	%
Russia	74,974		5	%	46,576		3	%	57,270		4	%
Other foreign ⁽¹⁾	996,793		63	%	991,200		61	%	936,307		61	%
Total	$	1,594,397	100	%	$	1,623,427	100	%	$	1,533,937	100	%

(1) Other foreign consists of numerous countries, none of which represents more than 5% of total revenue in any fiscal year presented.

Long-lived assets primarily consist of property and equipment, net, capitalized software development costs, net, and deferred costs of revenue. The Company believes that property and equipment, net, is exposed to the geographic area risks and uncertainties more than other long-lived assets, because these tangible assets are difficult to move and are relatively illiquid.

Property and equipment, net, by country of domicile consists of the following as of January 31, 2012 and 2011:



	January 31,
	2012		2011
	(In thousands)
United States	$	19,658	$	20,396
Israel	44,647		34,256
UK	2,850		1,912
France	692		1,561
Brazil	652		554
Other	7,214		8,164
	$	75,713	$	66,843