UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9247

CA, Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-2857434
(State or other jurisdiction of		(I.R.S. Employer Identification
incorporation or organization)		Number)
One CA Plaza
Islandia, New York		11749
(Address of principal executive offices)		(Zip Code)

1-800-225-5224
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year,
if changed since last report)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Title of Class		Shares Outstanding
Common Stock		as of October 15, 2010
par value $0.10 per share		511,619,718

 

 

CA, INC. AND SUBSIDIARIES

INDEX

		Page
PART I. Financial Information
Report of Independent Registered Public Accounting Firm			1
Item 1. Unaudited Condensed Consolidated Financial Statements			2
Condensed Consolidated Balance Sheets — September 30, 2010 and March 31, 2010			2
Condensed Consolidated Statements of Operations — Three and Six Months Ended September 30, 2010 and 2009			3
Condensed Consolidated Statements of Cash Flows — Six Months Ended September 30, 2010 and 2009			4
Notes to the Condensed Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Overview			22
Quarterly Update			26
Performance Indicators			27
Results of Operations			30
Liquidity and Capital Resources			36
Critical Accounting Policies and Business Practices			41
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			42
PART II. Other Information
Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43
Item 3. Defaults Upon Senior Securities			43
Item 4. Removed and Reserved			43
Item 5. Other Information			43
Item 6. Exhibits			44
Signatures			45

PART I. FINANCIAL INFORMATION

The Board of Directors and Stockholders
CA, Inc.:

We have reviewed the condensed consolidated balance sheet of CA, Inc. and subsidiaries as of September 30, 2010, the related condensed consolidated statements of operations for the three-month and six-month periods ended September 30, 2010 and 2009, and the related condensed consolidated statements of cash flows for the six-month periods ended September 30, 2010 and 2009. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of CA, Inc. and subsidiaries as of March 31, 2010, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated May 14, 2010, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2010, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ KPMG LLP

New York, New York
October 22, 2010

Item 1.

CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in millions, except share and per share amounts)

		September 30,				March 31,
		2010				2010
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	2,525			$	2,583
Trade and installment accounts receivable, net			697				931
Deferred income taxes — current			198				360
Other current assets			235				116
TOTAL CURRENT ASSETS			3,655				3,990
Installment accounts receivable, due after one year, net			—				46
Property and equipment, net of accumulated depreciation of $683 and $630, respectively			449				452
Goodwill			5,594				5,667
Capitalized software and other intangible assets, net			1,157				1,150
Deferred income taxes — noncurrent			435				355
Other noncurrent assets, net			209				178
TOTAL ASSETS		$	11,499			$	11,838
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current portion of long-term debt and loans payable		$	15			$	15
Accounts payable			77				81
Accrued salaries, wages and commissions			241				348
Accrued expenses and other current liabilities			375				425
Deferred revenue (billed or collected) — current			2,183				2,555
Taxes payable, other than income taxes payable — current			46				82
Federal, state and foreign income taxes payable — current			—				31
Deferred income taxes — current			55				51
TOTAL CURRENT LIABILITIES			2,992				3,588
Long-term debt, net of current portion			1,552				1,530
Federal, state and foreign income taxes payable — noncurrent			367				400
Deferred income taxes — noncurrent			207				134
Deferred revenue (billed or collected) — noncurrent			942				1,068
Other noncurrent liabilities			149				135
TOTAL LIABILITIES			6,209				6,855
STOCKHOLDERS’ EQUITY
Preferred stock, no par value, 10,000,000 shares authorized; No shares issued and outstanding			—				—
Common stock, $0.10 par value, 1,100,000,000 shares authorized; 589,695,081 and 589,695,081 shares issued; 505,388,039 and 509,469,998 shares outstanding, respectively			59				59
Additional paid-in capital			3,580				3,657
Retained earnings			3,759				3,361
Accumulated other comprehensive loss			(88	)			(130	)
Treasury stock, at cost, 84,307,042 shares and 80,225,083 shares, respectively			(2,020	)			(1,964	)
TOTAL STOCKHOLDERS’ EQUITY			5,290				4,983
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	11,499			$	11,838

See accompanying Notes to the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions, except per share amounts)

		For the Three								For the Six
		Months Ended								Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
REVENUE
Subscription and maintenance revenue		$	961			$	969			$	1,922			$	1,910
Professional services			79				70				157				140
Software fees and other			70				28				122				61
TOTAL REVENUE			1,110				1,067				2,201				2,111
EXPENSES
Costs of licensing and maintenance			74				72				151				138
Costs of professional services			75				59				146				125
Amortization of capitalized software costs			48				34				93				67
Selling and marketing			308				284				607				564
General and administrative			113				119				230				229
Product development and enhancements			125				114				253				231
Depreciation and amortization of other intangible assets			45				39				89				77
Other expenses, net			15				7				4				14
Restructuring and other			—				—				(3	)			2
TOTAL EXPENSES BEFORE INTEREST AND INCOME TAXES			803				728				1,570				1,447
Income from continuing operations before interest and income taxes			307				339				631				664
Interest expense, net			12				22				25				39
Income from continuing operations before income taxes			295				317				606				625
Income tax expense			73				99				161				212
INCOME FROM CONTINUING OPERATIONS			222				218				445				413
Loss from discontinued operations, net of income taxes			—				—				6				—
NET INCOME		$	222			$	218			$	439			$	413
BASIC INCOME (LOSS) PER SHARE
Income from continuing operations			0.43				0.42				0.86				0.79
Loss from discontinued operations			—				—				(0.01	)			—
Net income			0.43				0.42				0.85				0.79
Basic weighted average shares used in computation			507				518				508				517
DILUTED INCOME (LOSS) PER SHARE
Income from continuing operations			0.43				0.41				0.86				0.78
Loss from discontinued operations			—				—				(0.01	)			—
Net income			0.43				0.41				0.85				0.78
Diluted weighted average shares used in computation			508				542				509				541

See accompanying Notes to the Condensed Consolidated Financial Statements.

CA, INC. AND SUBSIDIARIES

(unaudited)

(in millions)

		For the Six Months
		Ended September 30,
		2010				2009
OPERATING ACTIVITIES:
Net income		$	439			$	413
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			182				146
Provision for deferred income taxes			187				68
Provision for bad debts			5				3
Share-based compensation expense			40				53
Amortization of discount on convertible debt			—				20
Asset impairments and other non-cash activities			(1	)			2
Foreign currency transaction gains			—				(9	)
Changes in other operating assets and liabilities, net of effect of acquisitions:
Decrease in trade and current installment accounts receivable, net			279				190
Decrease in deferred revenue			(513	)			(317	)
Decrease in taxes payable, net			(224	)			(96	)
Decrease in accounts payable, accrued expenses and other			(1	)			(13	)
Decrease in accrued salaries, wages and commissions			(76	)			(44	)
Decrease in restructuring liabilities			(44	)			(33	)
Changes in other operating assets and liabilities			(26	)			(1	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			247				382
INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired, and purchased software			(28	)			(5	)
Purchases of property and equipment			(47	)			(42	)
Cash proceeds from divestiture of assets			26				—
Capitalized software development costs			(73	)			(87	)
Other investing activities			(16	)			(2	)
NET CASH USED IN INVESTING ACTIVITIES			(138	)			(136	)
FINANCING ACTIVITIES:
Dividends paid			(41	)			(42	)
Purchases of common stock			(155	)			(45	)
Debt repayments			(7	)			(4	)
Exercise of common stock options and other			4				2
NET CASH USED IN FINANCING ACTIVITIES			(199	)			(89	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS BEFORE EFFECT OF EXCHANGE RATE CHANGES ON CASH			(90	)			157
Effect of exchange rate changes on cash			32				156
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(58	)			313
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			2,583				2,712
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	2,525			$	3,025

See accompanying Notes to the Condensed Consolidated Financial Statements.

CA, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

NOTE A — ACCOUNTING POLICIES

Basis of Presentation:

The accompanying unaudited Condensed Consolidated Financial Statements of CA, Inc. (the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), as defined in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 270, for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the Company’s Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010 (2010 Form 10-K).

In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, these estimates may ultimately differ from actual results.

Operating results for the three and six months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2011.

Divestitures:

In June 2010, the Company sold its Information Governance business to Autonomy Corporation plc (Autonomy). The results of operations and loss on discontinued operations associated with this business have been presented as discontinued operations in the accompanying Condensed Consolidated Statements of Operations for the six months ended September 30, 2010 and for the three and six months ended September 30 2009. The effects of the discontinued operations were considered immaterial to the Company’s Condensed Consolidated Balance Sheet at March 31, 2010 and Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2010 and 2009. See Note M, “Discontinued Operations,” for additional information.

In September 2010, the Company sold an equity investment and recognized a gain of approximately $10 million, which is included in “Other expenses, net” in the Company’s Condensed Consolidated Statements of Operations.

Cash Dividends:

The Company’s Board of Directors declared the following dividends during the six months ended September 30, 2010 and 2009:

Declaration Date		Dividend Per Share				Record Date		Total Amount				Payment Date
								(in millions)
Six Months Ended September 30, 2010:
May 12, 2010		$	0.04			May 31, 2010		$	21			June 16, 2010
July 28, 2010		$	0.04			August 9, 2010		$	20			August 19, 2010
Six Months Ended September 30, 2009:
May 20, 2009		$	0.04			May 31, 2009		$	21			June 16, 2009
July 29, 2009		$	0.04			August 10, 2009		$	21			August 19, 2009

Cash and Cash Equivalents:

The Company’s cash and cash equivalents are held in numerous locations throughout the world, with approximately 48% being held outside the United States by the Company’s foreign subsidiaries at September 30, 2010.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

Deferred Revenue (Billed or Collected):

The Company accounts for unearned revenue on billed amounts due from customers on a gross basis. Unearned revenue on billed installments (collected or uncollected) is reported as deferred revenue in the liability section of the Company’s Condensed Consolidated Balance Sheets. Deferred revenue (billed or collected) excludes unbilled contractual commitments executed under license and maintenance agreements that will be billed in future periods.

Stock Repurchases:

In April 2010, the Company completed the $250 million stock repurchase program authorized by its Board of Directors on October 29, 2008 by repurchasing approximately 0.8 million shares of its common stock for approximately $19 million. On May 12, 2010, the Company’s Board of Directors approved a new stock repurchase program that authorizes the Company to acquire up to $500 million of its common stock. Under the new program, the Company has repurchased approximately 7.1 million shares of its common stock for approximately $136 million as of September 30, 2010.

Statements of Cash Flows:

For the six months ended September 30, 2010 and 2009, interest payments were approximately $42 million and $34 million, respectively, and taxes paid were approximately $134 million and $176 million, respectively.

Non-cash financing activities for the six months ended September 30, 2010 and 2009 consisted of treasury shares issued in connection with the following: share-based incentive awards granted under the Company’s equity compensation plans of approximately $63 million (net of approximately $26 million of taxes withheld) and $63 million (net of approximately $22 million of taxes withheld), respectively; and discretionary stock contributions to the CA, Inc. Savings Harvest Plan of approximately $25 million and $24 million, respectively. Non-cash financing activities for the six months ended September 30, 2009 included approximately $21 million in treasury common shares issued in connection with the Company’s Employee Stock Purchase Plan. The Company discontinued its Employee Stock Purchase Plan on June 30, 2009.

NOTE B — COMPREHENSIVE INCOME

Comprehensive income includes net income, unrealized gains on cash flow hedges and foreign currency translation adjustments. The components of comprehensive income for the three and six months ended September 30, 2010 and 2009 are as follows:

		Three Months								Six Months
		Ended September 30,								Ended September 30,
		2010				2009				2010				2009
		(in millions)
Net income		$	222			$	218			$	439			$	413
Net unrealized gain on cash flow hedges, net of tax			1				—				2				1
Foreign currency translation adjustments			74				32				40				73
Total comprehensive income		$	297			$	250			$	481			$	487

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

NOTE C — INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of net income per share under the two-class method. Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of common stock and participating securities. The remaining undistributed income is then allocated to common stock and participating securities as if all of the net income for the period had been distributed. Basic net income per common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted-average number of common shares outstanding for the period. Diluted net income per common share is calculated by dividing net income allocable to common shares by the weighted-average number of common shares as of the balance sheet date, as adjusted for the potential dilutive effect of non-participating share-based awards and convertible notes. The following table reconciles net income per common share for the three and six months ended September 30, 2010 and 2009.

		Three								Six
		Months Ended								Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
		(in millions, except per share amounts)
Basic income from continuing operations per common share:
Income from continuing operations		$	222			$	218			$	445			$	413
Less: Income from continuing operations allocable to participating securities			(3	)			(2	)			(6	)			(4	)
Income from continuing operations allocable to common shares		$	219			$	216			$	439			$	409
Weighted-average common shares outstanding			507				518				508				517
Basic income from continuing operations per common share		$	0.43			$	0.42			$	0.86			$	0.79
Diluted income from continuing operations per common share:
Income from continuing operations		$	222			$	218			$	445			$	413
Add: Interest expense associated with Convertible Senior Notes, net of tax			—				8				—				14
Less: Income from continuing operations allocable to participating securities			(3	)			(2	)			(6	)			(4	)
Income from continuing operations allocable to common shares		$	219			$	224			$	439			$	423
Weighted average shares outstanding and common share equivalents
Weighted average common shares outstanding			507				518				508				517
Weighted average shares outstanding upon conversion of Convertible Senior Notes			—				23				—				23
Weighted average effect of share-based payment awards			1				1				1				1
Denominator in calculation of diluted income per share			508				542				509				541
Diluted income from continuing operations per common share		$	0.43			$	0.41			$	0.86			$	0.78

For the three months ended September 30, 2010 and 2009, respectively, approximately 8 million and 14 million restricted stock awards and options to purchase common stock were excluded from the calculation because their effect on income per share was anti-dilutive during the respective periods.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

For the six months ended September 30, 2010 and 2009, respectively, approximately 9 million and 14 million restricted stock awards and options to purchase common stock were excluded from the calculation because their effect on income per share was anti-dilutive during the respective periods.

Weighted average restricted stock awards of 6 million and 6 million common shares for the three months and six months ended September 30, 2010 and 2009, respectively, were considered participating securities in the calculation of net income available to common shareholders.

NOTE D — ACCOUNTING FOR SHARE-BASED COMPENSATION

The Company recognized share-based compensation in the following line items on the Condensed Consolidated Statements of Operations for the periods indicated:

		Three Months								Six Months
		Ended September 30,								Ended September 30,
		2010				2009				2010				2009
		(in millions)
Costs of licensing and maintenance		$	1			$	1			$	2			$	2
Costs of professional services			1				—				2				1
Selling and marketing			8				9				15				17
General and administrative			6				10				10				22
Product development and enhancements			5				6				11				11
Share-based compensation expense before tax			21				26				40				53
Income tax benefit			(7	)			(9	)			(13	)			(18	)
Net share-based compensation expense		$	14			$	17			$	27			$	35

There were no capitalized share-based compensation costs for the three and six months ended September 30, 2010 or 2009.

The following table summarizes information about unrecognized share-based compensation costs as of September 30, 2010:

						Weighted
		Unrecognized				Average Period
		Compensation				Expected to be
		Costs				Recognized
		(in millions)				(in years)
Stock option awards		$	5				2.7
Restricted stock units			14				2.2
Restricted stock awards			76				2.0
Performance share units			36				2.7
Total unrecognized share-based compensation costs		$	131				2.3

The value of performance share unit (PSU) awards is marked to the closing price of the Company’s common stock on the last trading day of the quarter until the PSUs are granted. Compensation costs for the PSUs are amortized over the requisite service periods based on the expected level of achievement of the performance targets. At the conclusion of the performance periods for the PSUs, the applicable number of shares of restricted stock awards (RSAs), restricted stock units (RSUs) or unrestricted shares granted may vary based upon the level of achievement of the performance targets and the approval of the Company’s Compensation and Human Resources Committee (who may reduce any award for any reason in their discretion).

For the six months ended September 30, 2010, the Company issued options for approximately 1.2 million shares of common stock. The weighted average fair value and assumptions used for these options were: weighted average fair value, $5.55; dividend yield, 0.83%; expected volatility factor, 0.34; risk-free interest rate, 1.8%; and expected term, 4.5 years.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

The table below summarizes all of the RSUs and RSAs, including PSU grants made pursuant to the long-term incentive plans discussed above, granted during the three and six months ended September 30, 2010 and 2009:

		Three Months								Six Months
		Ended September 30,								Ended September 30,
		2010				2009				2010				2009
		(shares in millions)
RSUs
Shares			—	(1)			—	(1)			0.5				0.6
Weighted Avg. Grant Date Fair Value (2)		$	18.08			$	18.64			$	21.23			$	17.46
RSAs
Shares			0.1				0.5				4.7				4.2
Weighted Avg. Grant Date Fair Value (3)		$	18.66			$	20.88			$	21.39			$	18.37

NOTE E — TRADE AND INSTALLMENT ACCOUNTS RECEIVABLE

Trade and installment accounts receivable, net represent amounts due from the Company’s customers. These balances are presented net of allowance for doubtful accounts and unamortized discounts. Unamortized discounts reflect imputed interest for the time value of money for license and maintenance agreements signed prior to October 2000 (prior business model). These balances include revenue recognized in advance of customer billings but do not include unbilled contractual commitments executed under license agreements implemented since October 2000. The components of trade and installment accounts receivable, net are as follows:

		September 30,				March 31,
		2010				2010
		(in millions)
Current:
Accounts receivable — billed		$	524			$	768
Accounts receivable — unbilled			81				72
Other receivables			26				26
Unbilled amounts due within the next 12 months — prior business model			93				93
Less: Allowance for doubtful accounts			(25	)			(24	)
Less: Unamortized discounts			(2	)			(4	)
Trade and installment accounts receivable, net		$	697			$	931
Noncurrent:
Unbilled amounts due beyond the next 12 months — prior business model		$	—			$	46
Installment accounts receivable, due after one year, net		$	—			$	46

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

NOTE F — GOODWILL, CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS

The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at September 30, 2010 were approximately $7,148 million and $5,991 million, respectively. These amounts include fully amortized intangible assets of approximately $5,207 million, composed of purchased software of approximately $4,640 million, internally developed software of approximately $447 million and other identified intangible assets subject to amortization of approximately $120 million. The remaining gross carrying amounts and accumulated amortization for capitalized software and other intangible assets that are not fully amortized are as follows:

		As of September 30, 2010
		Gross
		Amortizable				Accumulated				Net
		Assets				Amortization				Assets
		(in millions)
Purchased software products		$	669			$	173			$	496
Capitalized development cost and other intangibles:
Internally developed software products			658				211				447
Other identified intangible assets subject to amortization			600				400				200
Other identified intangible assets not subject to amortization			14				—				14
Total capitalized software and other intangible assets		$	1,941			$	784			$	1,157

Based on the capitalized software and other intangible assets recorded through September 30, 2010, the annual amortization expense over the next five fiscal years is expected to be as follows:

		Year Ended March 31,
		2011				2012				2013				2014				2015
		(in millions)
Capitalized software:
Purchased		$	84			$	73			$	66			$	58			$	47
Internally developed			104				115				103				84				58
Other identified intangible assets subject to amortization			66				44				38				33				29
Total		$	254			$	232			$	207			$	175			$	134

For the six months ended September 30, 2010, goodwill activity was as follows:

		Amounts
		(in millions)
Balance at March 31, 2010		$	5,667
Amounts allocated to loss on discontinued operations			(11	)
Change in estimate in purchase price allocation			(66	)
Foreign currency translation adjustment			4
Balance at September 30, 2010		$	5,594

NOTE G — DERIVATIVES AND FAIR VALUE MEASUREMENTS

The Company is exposed to financial market risks arising from changes in interest rates and foreign exchange rates. Changes in interest rates could affect the Company’s monetary assets and liabilities, and foreign exchange rate changes could affect the Company’s foreign currency denominated monetary assets and liabilities and forecasted transactions. The Company enters into derivative contracts with the intent of mitigating a portion of these risks.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

Interest rate swaps: During the first half of fiscal year 2011, the Company entered into interest rate swaps with a total notional value of $200 million to swap a total of $200 million of its 6.125% Senior Notes due December 2014 into floating interest rate debt through December 1, 2014. As a result, the Company has interest rate swaps with a total notional value of $500 million to swap a total of $500 million of its 6.125% Senior Notes due December 2014 into floating interest rate debt through December 1, 2014. These swaps are designated as fair value hedges and are being accounted for in accordance with the shortcut method of FASB ASC Topic 815.

As of September 30, 2010, the fair value of these derivatives was $30 million, of which $12 million is included in “Other current assets” and $18 million is included in “Other noncurrent assets” in the Company’s Condensed Consolidated Balance Sheet. As of March 31, 2010, the fair value of these derivatives was $1 million and is included in “Other current assets” in the Company’s Condensed Consolidated Balance Sheet.

During fiscal year 2009, the Company entered into separate interest rate swaps with a total notional value of $250 million to hedge a portion of its variable interest rate payments. These derivatives are designated as cash flow hedges.

The effective portion of these cash flow hedges is recorded as “Accumulated other comprehensive loss” in the Company’s Condensed Consolidated Balance Sheets and is reclassified into “Interest expense, net,” in the Company’s Condensed Consolidated Statements of Operations in the same period during which the hedged transaction affects earnings. Any ineffective portion of the cash flow hedges would be recorded immediately to “Interest expense, net”; however, no ineffectiveness existed at September 30, 2010 or 2009.

At September 30 and March 31, 2010, less than $1 million and $4 million, respectively, of the Company’s interest rate derivatives are included in “Accrued expenses and other current liabilities” on the Company’s Condensed Consolidated Balance Sheets.

Foreign currency contracts: The Company enters into foreign currency option and forward contracts to manage foreign currency risks. The Company has not designated its foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts are recorded as “Other expenses, net” in the Company’s Condensed Consolidated Statements of Operations. As of September 30, 2010, foreign currency contracts outstanding consisted of purchase and sales contracts with a total notional value of approximately $470 million, and durations of less than six months. The net fair value of these contracts at September 30, 2010 was approximately $4 million, of which approximately $9 million is included in “Other current assets” and approximately $5 million is included in “Accrued expenses and other current liabilities” in the Company’s Condensed Consolidated Balance Sheet.

A summary of the effect of the interest rate and foreign exchange derivatives on the Company’s Condensed Consolidated Statements of Operations is as follows:

		Amount of Net (Gain)/Loss Recognized in
		the Condensed Consolidated Statements of Operations
		(in millions)
		Three Months Ended				Three Months Ended
Location of Amounts Recognized		September 30, 2010				September 30, 2009
Interest expense, net — interest rate swaps designated as cash flows hedges		$	1			$	1
Interest expense, net — interest rate swaps designated as fair value hedges		$	(3	)		$	—
Other expenses, net — foreign currency contracts		$	21			$	5

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

		Amount of Net (Gain)/Loss Recognized in the
		Condensed Consolidated Statements of
		Operations
		(in millions)
		Six Months Ended				Six Months Ended
Location of Amounts Recognized		September 30, 2010				September 30, 2009
Interest expense, net — interest rate swaps designated as cash flows hedges		$	3			$	3
Interest expense, net — interest rate swaps designated as fair value hedges		$	(6	)		$	—
Other expenses, net — foreign currency contracts		$	8			$	25

For the Company’s cash flow hedges, the amount of loss recorded in “Accumulated other comprehensive loss” in the Company’s Condensed Consolidated Balance Sheet was less than $1 million at September 30, 2010. The amount of loss reclassified from “Accumulated other comprehensive income” into “Interest expense, net” in the Company’s Condensed Consolidated Statements of Operations was approximately $1 million and $3 million for the three and six months ended September 30, 2010, respectively. Less than $1 million is expected to be released from “Accumulated other comprehensive loss” to income in connection with the Company’s monthly interest payments on the hedged debt by the end of the third quarter of fiscal year 2011.

The Company is party to collateral security arrangements with most of its major counterparties. These arrangements require the Company to hold or post collateral when the derivative fair values exceed contractually established thresholds. The aggregate fair value of all derivative instruments under these collateralized arrangements that were in a liability position at September 30, 2010 was less than $1 million for which the Company posted no collateral. Under these agreements, if the Company’s credit ratings had been downgraded one rating level, the Company would still not have been required to post collateral.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

Items Measured at Fair Value on a Recurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30 and March 31, 2010.

		Fair Value Measurement at Reporting Date Using
		(in millions)
						Quoted Prices in
						Active Markets for				Significant Other
		Estimated Fair				Identical Assets				Observable Inputs
Description		Value				(Level 1)(1)				(Level 2)(2)
At September 30, 2010
Assets:
Money markets (3)		$	1,641			$	1,641			$	—
Foreign exchange derivatives not designated as hedges			9				—				9
Interest rate derivatives designated as fair value hedges(4)			30				—				30
Total Assets		$	1,680			$	1,641			$	39
Liabilities:
Foreign exchange derivatives not designated as hedges		$	5			$	—			$	5
Total Liabilities		$	5			$	—			$	5
At March 31, 2010
Assets:
Money markets(5)		$	1,805			$	1,805			$	—
Interest rate derivatives designated as fair value hedges(4)			1				—				1
Total Assets		$	1,806			$	1,805			$	1
Liabilities:
Interest rate derivatives designated as cash flow hedges		$	4			$	—			$	4
Total Liabilities		$	4			$	—			$	4

At September 30 and March 31, 2010, the Company did not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

The following table presents the carrying amounts and estimated fair values of the Company’s instruments that are not measured at fair value on a recurring basis at September 30, 2010:

		At September 30, 2010
		(in millions)
		Carrying Value				Estimated Fair Value
Liabilities:
Total debt (1)		$	1,567			$	1,699
Facilities abandonment reserve (2)		$	58			$	68

The following table presents the carrying amounts and estimated fair values of the Company’s instruments that are not measured at fair value on a recurring basis at March 31, 2010:

		At March 31, 2010
		(in millions)
		Carrying Value				Estimated Fair Value
Assets:
Noncurrent portion of installment accounts receivable (1)		$	46			$	46
Liabilities:
Total debt (2)		$	1,545			$	1,600
Facilities abandonment reserve (3)		$	69			$	79

The carrying value of financial instruments classified as current assets and current liabilities, such as cash and cash equivalents, accounts payable, accrued expenses, and short-term debt, approximate fair value due to the short-term maturity of the instruments. The fair values of derivatives and total debt, including current maturities, have been based on quoted market prices.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

NOTE H — RESTRUCTURING

Fiscal 2010 restructuring plan: The fiscal 2010 restructuring plan (Fiscal 2010 Plan) was approved on March 31, 2010. The Fiscal 2010 Plan is composed of a workforce reduction of approximately 1,000 positions and global facilities consolidations. These actions are intended to better align the Company’s cost structure with the skills and resources required to more effectively pursue opportunities in the marketplace and execute the Company’s long-term growth strategy. Actions under the Fiscal 2010 Plan were substantially completed by the end of the second quarter of fiscal year 2011.

For the six months ended September 30, 2010, restructuring activity under the Fiscal 2010 plan was as follows:

						Facilities
		Severance				Abandonment
		(in millions)
Accrued balance as of March 31, 2010		$	46			$	2
Changes in estimate			(3	)			—
Payments			(30	)			—
Accretion and other			(1	)			—
Accrued balance as of September 30, 2010		$	12			$	2

The liability balance for the severance portion of the remaining reserve is included in the “Accrued salaries, wages and commissions” line item on the Company’s Condensed Consolidated Balance Sheet.

Fiscal 2007 restructuring plan: In August 2006, the Company announced the fiscal 2007 restructuring plan (Fiscal 2007 Plan) to significantly improve the Company’s expense structure and increase its competitiveness. The Fiscal 2007 Plan’s objectives included a workforce reduction, global facilities consolidations and other cost reduction initiatives. The Company has recognized substantially all of the costs associated with the Fiscal 2007 Plan.

The reduction in workforce included approximately 3,100 individuals under the Fiscal 2007 Plan. Most of these actions have been completed; however, final payment of the severance amounts is dependent upon settlement with the works councils in certain international locations. The Company has also recognized substantially all of the facilities abandonment costs associated with the Fiscal 2007 Plan.

For the six months ended September 30, 2010, restructuring activity under the Fiscal 2007 Plan was as follows:

						Facilities
		Severance				Abandonment
		(in millions)
Accrued balance as of March 31, 2010		$	8			$	60
Changes in estimate		$	1			$	—
Payments			(3	)			(9	)
Accrued balance as of September 30, 2010		$	6			$	51

The liability balance for the severance portion of the remaining reserve is included in the “Accrued salaries, wages and commissions” line item on the Company’s Condensed Consolidated Balance Sheet. The liability for the facilities abandonment portion of the remaining reserve is included in the “Accrued expenses and other current liabilities” and “Other noncurrent liabilities” line items on the Company’s Condensed Consolidated Balance Sheet.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

NOTE I — INCOME TAXES

Income tax expense for the three and six months ended September 30, 2010 was $73 million and $161 million, respectively, compared with the three and six months ended September 30, 2009 of $99 million and $212 million, respectively.

For the three and six months ended September 30, 2010, the Company recognized a net tax benefit of $23 million and $36 million, respectively, resulting primarily from refinements of tax positions taken in prior periods, assertion of affirmative claims in the context of tax audits and the resolutions and accruals of uncertain tax positions relating to non-U.S. jurisdictions. For the three and six months ended September 30, 2009, the Company recognized a net tax benefit of $7 million resulting primarily from the resolution of uncertain tax positions relating to non-U.S. jurisdictions.

Income taxes receivable of approximately $87 million as of September 30, 2010 are included in other current assets in the Company’s Condensed Consolidated Balance Sheet. Additions to the liability for uncertain tax positions in the six months ended September 30, 2010 were approximately $139 million.

The Company’s effective tax rate, excluding the impact of discrete items, for the six months ended September 30, 2010 of 32.6% was different from the effective tax rate of 33.9% for the six months ended September 30, 2009 primarily due to the worldwide mix of estimated consolidated earnings before taxes and additional accruals and changes in estimates related to uncertain tax positions. The results of the Company’s international operations, the outcome of tax audits and any other changes in potential tax liabilities may result in additional tax expense or benefit in future periods, which are not considered in the Company’s estimated annual effective tax rate. The Company does not currently view any such items as individually material to the results of our operations or financial position. However, the impact of such items may yield additional tax expense in the second half of fiscal year 2011 and future periods and the Company is anticipating fiscal year 2011 effective tax rate of approximately 33% to 34%.

NOTE J — COMMITMENTS AND CONTINGENCIES

Certain legal proceedings in which the Company is involved are discussed in Note 9, “Commitments and Contingencies,” in the Notes to the Consolidated Financial Statements included in the Company’s 2010 Form 10-K. The following discussion should be read in conjunction with those financial statements.

Stockholder Derivative Litigation

In June and July 2004, three purported derivative actions were filed in the United States District Court for the Eastern District of New York (the Federal Court) by Ranger Governance, Ltd. (Ranger), Bert Vladimir and Irving Rosenzweig against certain current or former employees and/or directors of the Company. In November 2004, the Federal Court issued an order consolidating the three actions into Computer Associates International, Inc., Derivative Litigation, No. 04 Civ. 2697 (E.D.N.Y.) (the Derivative Action). The derivative plaintiffs filed a consolidated amended complaint (the Consolidated Complaint) on January 7, 2005. The Consolidated Complaint names as defendants Charles Wang, Sanjay Kumar, Ira Zar, Charles McWade, Peter Schwartz, William de Vogel, Richard Grasso, Roel Pieper, Russell Artzt, Alfonse D’Amato, Lewis Ranieri, Stephen Richards, Steven Woghin, David Kaplan, David Rivard, Lloyd Silverstein, Michael A. McElroy, Gary Fernandes, Robert E. La Blanc, Jay W. Lorsch, Kenneth Cron, Walter P. Schuetze, KPMG LLP, and Ernst & Young LLP. The Company is named as a nominal defendant. The Consolidated Complaint seeks from one or more of the defendants (1) contribution towards the consideration the Company had previously agreed to provide then current and former stockholders in settlement of certain class action litigation commenced against the Company and certain officers and directors in 1998 and 2002; (2) compensatory and consequential damages in an amount not less than $500 million in connection with the investigations giving rise to the Deferred Prosecution Agreement (DPA) entered into between the Company and the United States Attorney’s Office in 2004 and a consent to enter into a final judgment (Consent Judgment) in a parallel proceeding

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

brought by the SEC regarding certain of the Company’s past accounting practices, including its revenue recognition policies and procedures during certain periods prior to the adoption of the Company’s new business model in October 2000. (In May 2007, based upon the Company’s compliance with the terms of the DPA, the Federal Court ordered dismissal of the charges that had been filed against the Company in connection with the DPA, and the DPA expired. The injunctive provisions of the Consent Judgment permanently enjoining the Company from violating certain provisions of the federal securities laws remain in effect.); (3) unspecified relief for violations of Section 14(a) of the Exchange Act for alleged false and material misstatements made in the Company’s proxy statements issued in 2002 and 2003; (4) relief for alleged breach of fiduciary duty; (5) unspecified compensatory, consequential and punitive damages based upon allegations of corporate waste and fraud; (6) unspecified damages for breach of duty of reasonable care; (7) restitution and rescission of the compensation earned under the Company’s executive compensation plan; and (8) pursuant to Section 304 of the Sarbanes-Oxley Act, reimbursement of bonus or other incentive-based equity compensation and alleged profits realized from sales of securities issued by the Company. Although no relief is sought from the Company, the Consolidated Complaint seeks monetary damages, both compensatory and consequential, from the other defendants, including current or former employees and/or directors of the Company, Ernst & Young LLP and KPMG LLP in an amount totaling not less than $500 million.

On February 1, 2005, the Company established a Special Litigation Committee of members of its Board of Directors who are independent of the defendants to, among other things, control and determine the Company’s response to the Derivative Action. On April 13, 2007, the Special Litigation Committee issued its reports, which announced the Special Litigation Committee’s conclusions, determinations, recommendations and actions with respect to the claims asserted in the Derivative Action. The Special Litigation Committee also served a motion which seeks to dismiss and realign the claims and parties in accordance with the Special Litigation Committee’s recommendations. As summarized below, the Special Litigation Committee concluded as follows:

•		The Special Litigation Committee has concluded that it would be in the best interests of the Company to pursue certain of the claims against Messrs. Wang and Schwartz.
•		The Special Litigation Committee has concluded that it would be in the best interests of the Company to pursue certain of the claims against the former Company executives who have pled guilty to various charges of securities fraud and/or obstruction of justice — including Messrs. Kaplan, Richards, Rivard, Silverstein, Woghin and Zar. The Special Litigation Committee has determined and directed that these claims be pursued by the Company using counsel retained by the Company, unless the Special Litigation Committee is able to successfully conclude its ongoing settlement negotiations with these individuals.
•		The Special Litigation Committee has reached a settlement (subject to court approval) with Messrs. Kumar, McWade and Artzt.
•		The Special Litigation Committee believes that the claims against current and former Company directors Messrs. Cron, D’Amato, de Vogel, Fernandes, Grasso, La Blanc, Lorsch, Pieper, Ranieri and Schuetze should be dismissed. The Special Litigation Committee has concluded that these directors did not breach their fiduciary duties and the claims against them lack merit.
•		The Special Litigation Committee has concluded that it would be in the best interests of the Company to seek dismissal of the claims against Ernst & Young LLP, KPMG LLP and Mr. McElroy.

By letter dated July 19, 2007, counsel for the Special Litigation Committee advised the Federal Court that the Special Litigation Committee had reached a settlement of the Derivative Action with two of the three derivative plaintiffs — Bert Vladimir and Irving Rosenzweig. In connection with the settlement, both of these plaintiffs have agreed to support the Special Litigation Committee’s motion to dismiss and to realign. The Company has agreed to pay the attorney’s fees of Messrs. Vladimir and Rosenzweig in an

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

amount up to $525,000 each. If finalized, this settlement would require approval of the Federal Court. On July 23, 2007, Ranger filed a letter with the Federal Court objecting to the proposed settlement.

On October 29, 2007, the Federal Court denied the Special Litigation Committee’s motion to dismiss and realign, without prejudice to renewing the motion following a decision by the United States Court of Appeals for the Second Circuit (the Second Circuit) on an appeal brought by Ranger in connection with other derivative litigation. On December 14, 2009, the Company and the Special Litigation Committee renewed the motion to dismiss and realign. By an Order dated September 29, 2010, the Federal Court granted the motion in all respects, granting relief including the following: (1) dismissing the claims against current and former Company directors Messrs. Cron, D’Amato, de Vogel, Fernandes, Grasso, La Blanc, Lorsch, Pieper, Ranieri and Schuetze and Ernst & Young LLP, KPMG LLP and Mr. McElroy; and (2) realigning the Company as plaintiff with respect to certain of the claims against Messrs. Wang and Schwartz, Artzt, Kaplan, Kumar, McWade, Richards, Rivard, Silverstein, Woghin and Zar.

Other Civil Actions

In April 2010, a lawsuit captioned Stragent, LLC et ano. v. Amazon.com, Inc., et al. was filed in the United States District Court for the Eastern District of Texas against the Company and five other defendants. The complaint alleges, among other things, that Company technology, including the 2E product, infringes a patent assigned to plaintiff SeeSaw Foundation and licensed to plaintiff Stragent LLC, entitled “Method of Providing Data Dictionary-Driven Web-Based Database Applications,” U.S. Patent No. 6,832,226. The complaint seeks monetary damages and interest in an undisclosed amount, and costs, based upon plaintiffs’ patent infringement claims. In May 2010, the Company filed an answer and counterclaims that, among other things, dispute plaintiffs’ claims and seek a declaratory judgment that the Company does not infringe the patent-in-suit and that the patent is invalid. To date, no discovery has commenced in this action. Although the timing and ultimate outcome cannot be determined, the Company believes that the plaintiffs’ claims are unfounded and that the Company has meritorious defenses.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

In September 2010, a lawsuit captioned Uniloc USA, Inc. et ano. v. National Instruments Corp., et al. was filed in the United States District Court for the Eastern District of Texas against the Company and 10 other defendants. The complaint alleges, among other things, that Company technology, including Internet Security Suite Plus 2010, infringes a patent licensed to plaintiff Uniloc USA, Inc., entitled “System for Software Registration,” U.S. Patent No. 5,490,216. The complaint seeks monetary damages and interest in an undisclosed amount, a temporary, preliminary and permanent injunction against alleged acts of infringement, attorneys’ fees and costs, based upon the plaintiffs’ patent infringement claims. Although the timing and ultimate outcome cannot be determined, the Company believes that the plaintiffs’ claims are unfounded and that the Company has meritorious defenses.

The Company, various subsidiaries, and certain current and former officers have been named as defendants in various other lawsuits and claims arising in the normal course of business. The Company believes that it has meritorious defenses in connection with such lawsuits and claims, and intends to vigorously contest each of them.

In the opinion of the Company’s management based upon information currently available to the Company although the outcome of the matters listed in this Note as well as these other lawsuits and claims is uncertain, the results of pending matters against the Company, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows, although the effect could be material to the Company’s results of operations or cash flows for any interim reporting period.

The Company is obligated to indemnify its officers and directors under certain circumstances to the fullest extent permitted by Delaware law. As a part of that obligation, the Company has advanced and will continue to advance certain attorneys’ fees and expenses incurred by current and former officers and directors in various litigations and investigations arising out of similar allegations, including the litigation described above.

NOTE K — DEFERRED REVENUE

The components of “Deferred revenue (billed or collected) — current” and “Deferred revenue (billed or collected) — noncurrent” as of September 30, 2010 and March 31, 2010 are as follows:

		September 30,				March 31,
		2010				2010
		(in millions)
Current:
Subscription and maintenance		$	2,037			$	2,389
Professional services			138				151
Financing obligations and other			8				15
Total deferred revenue (billed or collected) — current			2,183				2,555
Noncurrent:
Subscription and maintenance			924				1,042
Professional services			17				24
Financing obligations and other			1				2
Total deferred revenue (billed or collected) — noncurrent			942				1,068
Total deferred revenue (billed or collected)		$	3,125			$	3,623

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(unaudited)

NOTE L — ACQUISITIONS

The Company’s acquisitions during the first half of fiscal year 2011 were considered immaterial, both individually and in the aggregate, compared with the results of the Company’s operations. Therefore, purchase accounting information and pro-forma disclosure are not presented.

The following represents the aggregate allocation of the purchase price and estimated useful lives to the acquired net assets of Nimsoft AS (Nimsoft), 3Tera, Inc. (3Tera) and Oblicore, Inc. (Oblicore), which were acquired during fiscal year 2010. The increase in the revision of the values assigned to purchased software from the original amounts reported for fiscal year 2010 was approximately $54 million. The amortization effects were immaterial. During the first six months of fiscal year 2011, the Company finalized the purchase price allocation for 3Tera and Oblicore. The Company expects to finalize the purchase price allocation for Nimsoft in the third quarter of fiscal year 2011. Any revisions are not expected to be material. The revised purchase price allocation for Nimsoft, 3Tera and Oblicore is as follows:

						Estimated
(dollars in millions)		Amount				Useful Life
Finite-lived intangible assets(1)		$	46			5-6 years
Purchased software			319			10 years
Goodwill			117			Indefinite
Deferred taxes, net liability			(7	)		—
Other assets net of other liabilities assumed			(2	)		—
Purchase Price		$	473

The excess purchase price over the estimated value of the net tangible and identifiable intangible assets was recorded as goodwill. The allocation of a significant portion of the purchase price to goodwill was predominantly due to the intangible assets that are not separable, such as assembled workforce and going concern.

The pro forma effects of the acquisitions to the Company’s revenues and results of operations during fiscal year 2010 were considered immaterial, both individually and in the aggregate.

The Company had approximately $69 million and $74 million of accrued acquisition-related costs as of September 30, 2010 and March 31, 2010, respectively. Approximately $64 million of the accrued acquisition related costs at September 30, 2010 and March 31, 2010, related to purchase price amounts withheld subject to indemnification protections.

Acquisition-related costs are comprised of employee costs, duplicate facilities and other acquisition-related costs that are incurred as a result of the Company’s prior period acquisitions.

NOTE M — DISCONTINUED OPERATIONS

Discontinued Operations: In June 2010, the Company sold its Information Governance business, consisting primarily of the CA Records Manager and CA Message Manager software offerings and related professional services, for approximately $19 million to Autonomy. The loss from discontinued operations of approximately $6 million included in the Company’s Condensed Consolidated Statement of Operations for the six months ended September 30, 2010 consists of a loss from operations of approximately $1 million, net of taxes of approximately $1 million, and a loss upon disposal of approximately $5 million, inclusive of taxes of approximately $4 million.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010

(unaudited)

The Information Governance business results for the three and six months ended September 30, 2009 consisted of revenue of $5 million and $11 million, respectively, and income from operations of less than $1 million in both periods.

NOTE N — SUBSEQUENT EVENTS

On October 4, 2010, the Company completed the acquisition of 100% of the voting equity interests of Arcot Systems, Inc. (Arcot), a privately held provider of authentication and fraud prevention solutions through on premises software or cloud services. The acquisition of Arcot adds technology for fraud prevention and authentication to the Company’s Identity and Access Management offerings. The total purchase price of the acquisition was approximately $200 million. Due to the timing of this acquisition, the Company has not completed the allocation of purchase price to acquired identifiable assets, including intangible assets.

Item 2:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statement

This Quarterly Report on Form 10-Q (Form 10-Q) contains certain forward-looking information relating to CA, Inc. (the “Company,” “Registrant,” “CA,” “we,” “our,” or “us”), that is based on the beliefs of, and assumptions made by, our management as well as information currently available to management. When used in this Form 10-Q, the words “anticipate,” “believe,” “estimate,” “expect” and similar expressions are intended to identify forward-looking information. Such information includes, for example, the statements made in this Management Discussion and Analysis of Financial Condition and Results of Operations (MD&A), but also appears in other parts of this Form 10-Q. This forward-looking information reflects our current views with respect to future events and is subject to certain risks, uncertainties, and assumptions.

A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the ability to achieve success in the Company’s strategy by, among other things, increasing sales in new and emerging enterprises and markets, enabling the sales force to sell new products and Software-as-a-Service offerings and improving the Company’s brand in the marketplace; global economic factors or political events beyond the Company’s control; general economic conditions, including concerns regarding a global recession and credit constraints, or unfavorable economic conditions in a particular region, industry or business sector; failure to expand channel partner programs; the ability to adequately manage and evolve financial reporting and managerial systems and processes; the ability to successfully acquire technology and software that are consistent with our strategy and integrate acquired companies and products into existing businesses; competition in product and service offerings and pricing; the ability to retain and attract qualified key personnel; the ability to adapt to rapid technological and market changes; the ability of the Company’s products to remain compatible with ever-changing operating environments; access to software licensed from third parties, third-party code and specifications for the development of code; use of software from open source code sources; discovery of errors in the Company’s software and potential product liability claims; significant amounts of debt and possible future credit rating changes; the failure to protect the Company’s intellectual property rights and source code; fluctuations in the number, terms and duration of our license agreements as well as the timing of orders from customers and channel partners; reliance upon large transactions with customers; risks associated with sales to government customers; breaches of the Company’s software products and the Company’s and customers’ data centers and IT environments; access to third-party microcode; third-party claims of intellectual property infringement or royalty payments; fluctuations in foreign currencies; failure to successfully execute restructuring plans; successful outsourcing of various functions to third parties; potential tax liabilities; and these factors and the other factors described more fully in this Form 10-Q and the Company’s other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties occur, or should our assumptions prove incorrect, actual results may vary materially from those described in this Form 10-Q as anticipated, believed, estimated, or expected. We do not intend to update these forward-looking statements, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. This MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes to the financial statements. References in this Form 10-Q to fiscal 2011 and fiscal 2010 are to our fiscal years ending on March 31, 2011 and 2010, respectively.

OVERVIEW

We are the leading independent enterprise IT management software and service company with deep expertise across IT environments – from mainframe and distributed to virtual and cloud. We develop and deliver software and services that help organizations manage and secure their IT infrastructures and deliver more flexible IT services. This allows companies to more effectively and efficiently respond to business needs. We address virtually all of the components of the computing environment, including

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
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people, information, processes, systems, networks, applications and databases, regardless of the hardware or software customers are using.

We license our products worldwide. We service companies across most major industries worldwide, including banks, insurance companies, other financial services providers, governmental agencies, manufacturers, technology companies, retailers, and educational and health care institutions. These customers typically maintain IT infrastructures that are both complex and central to their objectives for operational excellence.

We offer our software products and solutions directly to our customers through our direct sales force and indirectly through global systems integrators, managed service providers, technology partners, value-added resellers, exclusive representatives and distributors and volume partners.

We are the leading independent software vendor in the mainframe space, and we continue to innovate on the platform that runs many of our largest customers’ most important applications. As the IT landscape continues to evolve, more companies are seeking to improve the efficiency and availability of their IT resources and applications through virtualization, which enables users to run multiple virtual machines on each physical machine and thereby reduce operating costs associated with physical infrastructure. Virtualization is an essential enabling technology for many of the key cloud computing attributes. The increasing adoption of virtualization and the evolution of cloud computing is leading to more complex data centers that include physical servers, virtualized servers, private cloud environments and public cloud applications. As a result of this heightened complexity, it is increasingly important for companies to have a choice of robust, heterogeneous, virtualization-specific management solutions, covering multiple management disciplines across IT environments.

To address these market demands, we have built a broad portfolio of distributed and mainframe software products with a specific focus on mainframe; service management and service assurance; project and portfolio management; security (identity and access management); virtualization and service automation; and cloud computing. We deliver our products on-premises or, for certain products, via Software-as-a-Service (SaaS).

Our current strategy emphasizes accelerating our growth by continuing to build on our portfolio of software and services to address customer needs in the above-mentioned areas of focus through a combination of internal development and acquired technologies. We believe this strategy builds on our core strengths in IT management while also positioning us to compete in high-growth markets, including virtualization, cloud and SaaS. We are also seeking to expand our business beyond our traditional core customers, generally consisting of large enterprises, to reach emerging enterprises (which we also refer to as growth accounts and define as companies with revenue of $300 million to $2 billion) and customers in emerging geographies (which we also refer to as our growth geographies).

Our ability to achieve success in our growth strategy could be affected by many of the risk factors described in more detail in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010 (the 2010 Form 10-K).

To enable us to execute our growth strategy more effectively, we have:

	•		Completed several key acquisitions since September 30, 2009 in an effort to expand our product portfolio, including Arcot Systems, Inc., Nimsoft AS, 3Tera, Inc., Oblicore, Inc. and NetQoS, Inc.;
	•		Re-branded our company; and
	•		Realigned our operations by creating two new organizations — the Customer Solutions Group and the Technology and Development Group. Working with our existing Sales Organization, the new organizations are intended to drive collaboration and accountability across the Company while enabling us to deliver even greater customer service and product innovation.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
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While not necessarily material to our results in a period, management also looks to the following operational priorities to get a view as to how we are executing against our growth strategy:

	•		Increasing the number of freestanding sales with new products;
	•		Responding to customer demand in growth geographies and growth accounts; and
	•		Continuing to align the organization to be more responsive to customer needs and emerging trends.

Increasing the number of freestanding sales with new products. We define this as new sales of products outside of a renewal and look at this in terms of how we engage our customers, including whether we are becoming less dependent on a renewal cycle as a compelling event to sell new products. Freestanding sales give us the opportunity to increase our share of customer spending through both cross-selling to current customers and the addition of new customers. Our success can be seen in our progress in increasing new product sales.

Responding to customer demand in growth geographies and growth accounts. We have increased our investment in growth geographies—which for us also includes Japan and Australia. Recently we brought new management talent into several key roles. While we do not expect these investments to have a material impact this fiscal year, we are encouraged by results in countries like Mexico and Japan. Our Nimsoft acquisition also accelerates our ability to access both growth accounts and growth geographies through new channels, including managed service providers.

Continuing to align our organization to be more responsive to customer needs and emerging trends. We continue to align the organization to be more responsive to customer needs and emerging trends. Substantial initial work was done on realigning our organization at the beginning of July 2010, when we created the Customer Solutions Group or CSG. We are already seeing the CSG organization help improve our execution and we expect, over time, that it will further enhance our competitive positioning and ability to respond to the needs of our customers and changes in the market. It also helps us drive results from both the assets we have developed and those that we have acquired.

As our growth strategy has evolved, our management also looks within bookings at total new product and capacity sales, which we define as sales of products or capacity that are new or in addition to products or capacity previously contracted for by a customer. The amount of new product and capacity sales for a period, as currently tracked by the Company, requires estimation by management and has not been historically reported. Within a given period, the amount of new product and capacity sales may not be material to the change in our total bookings or revenue compared to prior periods.

For further discussion of our business and business model, see our 2010 Form 10-K. For further discussion of our Critical Accounting Policies and Business Practices, see “Critical Accounting Policies and Business Practices.”

Executive Summary

The following is a summary of the analysis of our results contained in our Management’s Discussion and Analysis.

Our financial results for the second quarter of fiscal 2011 reflect a total revenue backlog of $7,832 million. This represents 2% growth, compared with $7,687 million in the prior year period. The current portion of revenue backlog represents revenue to be recognized within the next 12 months. The $3,463 million of the current portion of revenue backlog at September 30, 2010 increased by 3%, compared with the balance of $3,365 million at September 30, 2009. Generally, we believe that an increase in the current portion of revenue backlog is a positive indicator of future revenue growth.

We also saw positive results for total new product and capacity sales for the quarter, which grew in the high single digits year over year. Generally, total new product and capacity sales consist of new sales of distributed products, mainframe products and capacity. Total bookings in the quarter grew 9%, due

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
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primarily to an increase in new sales of distributed products recognized on an up-front basis and subscription and maintenance bookings. In the current quarter, while subscription and maintenance bookings were up slightly, there was a significant increase in new sales of our distributed products that was partially offset by a significant decline in mainframe capacity sales. We expect momentum in mainframe bookings to build as our renewal portfolio increases in the second half of fiscal 2011, which should also drive our mix of new business to subscription and maintenance bookings.

Total revenue for the second quarter of fiscal 2011 was $1,110 million and grew 4%, compared with $1,067 million in the year-ago period. Robust growth in the United States revenue of $50 million or 9%, was partially offset by a $7 million or 1% decrease in international revenue. Excluding an unfavorable foreign exchange effect of $15 million, international revenue would have increased by $8 million or 2%. Our revenue growth was 1% from existing products while 3% was from acquired technologies (which we define as technology acquired within the prior 12 months). Excluding the unfavorable foreign currency effect, revenue growth was evenly split between existing products and acquired technologies. Revenue from software fees and other for the second quarter of fiscal 2011 increased by 150% to $70 million, compared with the year-ago period, primarily due to revenue generated from new distributed product sales of existing and acquired products. Professional services revenues for the second quarter of fiscal 2011 increased by 13% as compared to the prior year comparable period. Subscription and maintenance revenue for the second quarter of fiscal 2011 decreased by 1% to $961 million, compared with the year-ago period. This decrease was due to an unfavorable foreign currency effect of $15 million.

Total expense before interest and income taxes of $803 million grew 10%, compared with $728 million from the year-ago period. This increase includes a favorable foreign currency effect of $11 million. The increase was primarily the result of acquisitions that we closed during fiscal 2010, offset by a one-time $10 million benefit from the sale of an equity interest. We may experience similar additional costs associated with any future acquisitions.

Income before interest and income taxes decreased by 9% in the second quarter of fiscal 2011, due to an increase in total expenses before interest and income taxes of 10%. This increase resulted from the increased costs as noted above. Diluted income from continuing operations per share for the second quarter of fiscal 2011 was $0.43, compared with $0.41 in the year-ago period, reflecting in part the Company’s repurchase of its common shares.

Cash flow from operations in the second quarter of fiscal 2011 was $130 million and grew 8%, compared with $120 million in the year-ago period. This growth reflects a year-over-year increase in single installment payments, which were $124 million in the second quarter of fiscal 2011, compared with $64 million in the year-ago period. For the first half of fiscal 2011, gross receipts related to single installments for the entire contract value or a substantial portion of the contract value were $214 million, compared with $228 million in the first half of fiscal 2010. The second quarter of fiscal 2011 also reflected an increase in vendor disbursements and payroll of $77 million, compared with the year-ago period, primarily due to the acquisitions that we closed during fiscal 2010.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
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QUARTERLY UPDATE

	•		In August 2010, we acquired 4Base Technology, a virtualization and cloud infrastructure consulting firm, as part of our continued investment in virtualization and cloud management.
	•		In September 2010, we announced a strategic alliance with Fujitsu Limited to enhance each company’s service assurance product portfolio and cloud computing strategies. This partnership will help assure service quality across the application infrastructure and support cloud development.
	•		In October 2010, we acquired Arcot Systems, Inc. in an all-cash transaction valued at approximately $200 million, to support our cloud strategy and add technology for fraud prevention and authentication for identity and access management offerings.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

PERFORMANCE INDICATORS

Management uses several quantitative performance indicators to assess our financial results and condition. Following is a summary of the principal quantitative performance indicators that management uses to review performance:

		Second Quarter
		Comparison
		Fiscal Year 2011 versus
		Fiscal Year 2010												Percent
		2011				2010(1)				Change				Change
		(dollars in millions)
Total revenue		$	1,110			$	1,067			$	43				4	%
Subscription and maintenance revenue		$	961			$	969			$	(8	)			(1	)%
Net income		$	222			$	218			$	4				2	%
Cash provided by operating activities		$	130			$	120			$	10				8	%
Total bookings		$	1,018			$	934			$	84				9	%
Subscription and maintenance bookings		$	865			$	844			$	21				2	%
Weighted average subscription and maintenance license agreement duration in years			3.47				3.26				0.21				6	%
Annualized subscription and maintenance bookings		$	249			$	259			$	(10	)			(4	)%

		First Half Comparison
		Fiscal Year 2011 versus
		Fiscal Year 2010												Percent
		2011				2010(1)				Change				Change
		(dollars in millions)
Total revenue		$	2,201			$	2,111			$	90				4	%
Subscription and maintenance revenue		$	1,922			$	1,910			$	12				—	%
Net income		$	439			$	413			$	26				6	%
Cash provided by operating activities		$	247			$	382			$	(135	)			(35	)%
Total bookings		$	1,768			$	2,126			$	(358	)			(17	)%
Subscription and maintenance bookings		$	1,502			$	1,930			$	(428	)			(22	)%
Weighted average subscription and maintenance license agreement duration in years			3.24				3.79				(0.55	)			(15	)%
Annualized subscription and maintenance bookings		$	464			$	509			$	(45	)			(9	)%

										Change								Change
		Sept. 30,				March 31,				From				Sept. 30,				From Prior
		2010				2010(1)				Year End				2009				Year Quarter
		(in millions)
Cash and cash equivalents		$	2,525			$	2,583			$	(58	)		$	3,025			$	(500	)
Total debt		$	1,567			$	1,545			$	22			$	1,934			$	(367	)
Total expected future cash collections from committed contracts(2)		$	5,404			$	5,555			$	(151	)		$	5,247			$	157
Total revenue backlog(2)		$	7,832			$	8,193			$	(361	)		$	7,687			$	145

Analyses of our performance indicators, including general trends, can be found in the “Results of Operations” and “Liquidity and Capital Resources” sections of this MD&A.

Subscription and Maintenance Revenue — Subscription and maintenance revenue is the amount of revenue recognized ratably during the reporting period from: (i) subscription license agreements that were in effect during the period, generally including maintenance that is bundled with and not separately identifiable from software usage fees or product sales, (ii) maintenance agreements associated with providing customer technical support and access to software fixes and upgrades that are separately identifiable from software usage fees or product sales, and (iii) license agreements bundled with additional products, maintenance or professional services for which Vendor Specific Objective Evidence (VSOE) has not been established. These amounts include the sale of products directly by us, as well as by distributors and volume partners, value-added resellers and exclusive representatives to end-users, where the contracts incorporate the right for end-users to receive unspecified future software products, and other contracts entered into in close proximity or contemplation of such agreements.

Total Bookings — Total bookings includes the incremental value of all subscription, maintenance and professional service contracts and software fees and other contracts entered into during the reporting period and is generally reflective of the amount of products and services during the period that our customers have agreed to purchase from us. Revenue for bookings attributed to sales of software products for which revenue is recognized on an up-front basis is reflected in the “software fees and other” line item of our Condensed Consolidated Statements of Operations.

Subscription and Maintenance Bookings — Subscription and maintenance bookings is the aggregate incremental amount we expect to collect from our customers over the terms of the underlying subscription and maintenance agreements entered into during a reporting period. These amounts include the sale of products directly by us and may include additional products, services or other fees for which we have not established VSOE of fair value. Subscription and maintenance bookings also includes indirect sales by distributors and volume partners, value-added resellers and exclusive representatives to end-users, where the contracts incorporate the right for end-users to receive unspecified future software products, and other contracts without these rights entered into in close proximity or contemplation of such agreements. These amounts are expected to be recognized ratably as subscription and maintenance revenue over the applicable term of the agreements. Subscription and maintenance bookings excludes the value associated with certain perpetual licenses, license-only indirect sales, and professional services arrangements.

The license and maintenance agreements that contribute to subscription and maintenance bookings represent binding payment commitments by customers over periods that range generally from three to five years on a weighted average basis, although in certain cases customer commitments can be for longer or shorter periods. These current period bookings are often renewals of prior contracts that also had various durations, usually from three to five years. The amount of new subscription and maintenance bookings recorded in a period is affected by the volume, duration and value of contracts renewed during that period. Our subscription and maintenance bookings typically increase in each consecutive quarter during a fiscal year, with the first quarter having the least bookings and the fourth quarter having the most bookings. However, subscription and maintenance bookings may not always follow the pattern of increasing in consecutive quarters during a fiscal year, and the quarter-to-quarter differences in subscription and maintenance bookings may vary. Given the varying durations of the contracts being renewed, year-over-year comparisons of bookings are not always indicative of the overall bookings trend. Additionally, management also looks within bookings at the yield on our renewal portfolio. We define this as the percentage of prior contract value realized from renewals during the period. The baseline for calculating renewal yield is an estimate affected by various factors including contractual renewal terms and other conditions. We estimate the yield based on a review of material transactions representing a substantial majority of the dollar value of renewals during the current period. Changes in renewal yield may not be material to changes in bookings compared to prior periods.

Generally, we believe that an increase in the current portion of revenue backlog is a positive indicator of future revenue growth due to the high percentage of our revenue that is recognized from license agreements that are already committed and being recognized ratably.

Additionally, period-to-period changes in subscription and maintenance bookings do not necessarily correlate to changes in cash receipts. The contribution to current period revenue from subscription and maintenance bookings from any single license or maintenance agreement is relatively small, since revenue is recognized ratably over the applicable term for these agreements.

Weighted Average Subscription and Maintenance License Agreement Duration in Years — The weighted average subscription and maintenance license agreement duration in years reflects the duration of all subscription and maintenance agreements executed during a period, weighted by the total contract value of each individual agreement. Weighted average subscription and maintenance license agreement duration in years can fluctuate from period to period depending on the mix of license agreements entered into during a period. Weighted average duration information is disclosed in order to provide additional understanding of the volume of our bookings.

Annualized Subscription and Maintenance Bookings — Annualized subscription and maintenance bookings is an indicator that normalizes the bookings recorded in the current period to account for contract length. It is calculated by dividing the total value of all new subscription and maintenance license agreements entered into during a period by the weighted average subscription and license agreement duration in years for all such subscription and maintenance license agreements recorded during the same period.

Total Revenue Backlog — Total revenue backlog represents the aggregate amount we expect to recognize as revenue in the future as either subscription and maintenance revenue, professional services revenue or software fees and other revenue associated with contractually committed amounts billed or to be billed as of the balance sheet date. Total revenue backlog is composed of amounts recognized as liabilities in our Condensed Consolidated Balance Sheets as deferred revenue (billed or collected) as well as unearned amounts yet to be billed under subscription and maintenance and software fees and other agreements. Classification of amounts as current and non-current depends on when such amounts are expected to be earned and therefore recognized as revenue. Amounts that are expected to be earned and therefore recognized as revenue in 12 months or less are classified as current, while amounts expected to be earned in greater than 12 months are classified as non-current. The portion of the total revenue backlog that relates to subscription and maintenance agreements is recognized as revenue evenly on a monthly basis over the duration of the underlying agreements and is reported as subscription and maintenance revenue in our Condensed Consolidated Statements of Operations. Generally, we believe that an increase in the current portion of revenue backlog is a positive indicator of future revenue growth.

“Deferred revenue (billed or collected)” is composed of: (i) amounts received from customers in advance of revenue recognition, (ii) amounts billed but not collected for which revenue has not yet been earned, and (iii) amounts received in advance of revenue recognition from financial institutions where we have transferred our interest in committed installments (referred to as “Financing obligations and other” in Note K, “Deferred Revenue” in the Notes to our Condensed Consolidated Financial Statements).

RESULTS OF OPERATIONS

The following tables present changes in the line items on our Condensed Consolidated Statements of Operations for the second quarter and first half of fiscal 2011 and 2010, respectively, measured by Dollar Change, Percentage of Dollar Change, and Percentage of Total Revenue. These comparisons of past financial results are not necessarily indicative of future results.

		Second Quarter Comparison – Fiscal Year 2011 versus Fiscal Year 2010
														Percentage
										Dollar				of				Percentage of
										Change				Dollar				Total
										2011/				Change				Revenue
		2011				2010 (1)				2010				2011/2010				2011				2010
		(dollars in millions)
Revenue
Subscription and maintenance revenue		$	961			$	969			$	(8	)			(1	)%			87	%			91	%
Professional services			79				70				9				13				7				6
Software fees and other			70				28				42				150				6				3
Total revenue			1,110				1,067				43				4				100				100
Expenses
Costs of licensing and maintenance			74				72				2				3				7				7
Costs of professional services			75				59				16				27				7				6
Amortization of capitalized software costs			48				34				14				41				4				3
Selling and marketing			308				284				24				8				28				27
General and administrative			113				119				(6	)			(5	)			10				11
Product development and enhancements			125				114				11				10				11				11
Depreciation and amortization of other intangible assets			45				39				6				15				4				4
Other expenses, net			15				7				8				114				1				1
Restructuring and other			—				—				—				—				—				—
Total expenses before interest and income taxes			803				728				75				10				72				68
Income before interest and income taxes			307				339				(32	)			(9	)			28				32
Interest expense, net			12				22				(10	)			(45	)			1				2
Income before income taxes			295				317				(22	)			(7	)			27				30
Income tax expense			73				99				(26	)			(26	)			7				9
Income from continuing operations			222				218				4				2				20				20
Loss from discontinued operations			—				—				—				—				—				—
Net Income		$	222			$	218			$	4				2	%			20	%			20	%