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Article by DailyStocks_admin    (11-12-08 10:34 AM)

The Daily Magic Formula Stock for 11/12/2008 is CA Inc. According to the Magic Formula Investing Web Site, the ebit yield is 11% and the EBIT ROIC is >100 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


Dailystocks.com makes NO RECOMMENDATIONS whatsoever, and provides this for informational purpose only.

BUSINESS OVERVIEW

Overview
CA, Inc., the world’s leading independent information technology (IT) management software company, helps organizations use IT to better perform, compete, innovate and grow. We provide software solutions to unify and simplify IT management in highly complex computing environments. With CA’s Enterprise IT Management (EITM) vision and our expertise, organizations can more effectively govern, manage and secure IT to reduce costs and risks, improve service and ensure IT is enabling their businesses’ success.

The Company was incorporated in Delaware in 1974, began operations in 1976, and completed an initial public offering of common stock in December 1981. During fiscal 2008 and through April 27, 2008, our common stock was traded on the New York Stock Exchange under the symbol “CA.” On April 28, 2008 we commenced trading on The NASDAQ Global Select Market tier of The NASDAQ Stock Market LLC under the same symbol.

We help customers govern, manage and secure their entire IT operation — all of the people, information, processes, systems, networks, applications and databases from a Web service to the mainframe, regardless of the hardware or software they are using. We serve the majority of companies in the Forbes Global 2000, who rely on our software, in part, to manage mission critical aspects of their businesses. We have a broad portfolio of software products and services that address our customers’ needs for distributed or mainframe environments, spanning key growth areas including infrastructure management, project and portfolio management, IT security management, service management, data center automation and application performance management, as well as storage and business governance.

Business Developments and Highlights
In fiscal 2008, we took the following actions to support our business:


• We sharpened our focus on enterprise customers who, by the nature of their size and the complexity of their IT infrastructures, have unique demands that our software and services are well suited to meet. Throughout the year, we continued to evolve our solutions to govern, manage and secure IT in line with customer needs and reinforced our commitment to the mainframe market, which is an important market for our customers and us. • In February 2008, we finalized an agreement with HCL Technologies (HCL) to establish a strategic partnership in which HCL assumed all responsibilities for product development and research as well as customer support associated with our Internet Security business. We retain all sales and marketing functions for the Internet Security business.

• In January 2008, we announced a series of initiatives to help customers derive the most long-term business value from their significant investments in mainframe computing technology. The initiatives include new mainframe suites, new no-cost consulting services and simplified models for pricing and licensing. These initiatives are designed to ease the pressures customers are under to improve the efficiency and effectiveness with which they govern, manage and secure their mainframe environments. This has become particularly important as the role of the mainframe continues to evolve and organizations become increasingly dependent on highly scalable, highly available and highly secure IT services capable of supporting large-scale database activity and intense transaction loads.

• In November 2007, we announced a major new version of our CA Identity and Access Management solution that helps customers more securely and efficiently enable their businesses with service-oriented architecture (SOA) and Web services.

• In October 2007, we announced the official opening of our new India Technology Center facility (CA ITC) in Hyderabad, increasing our presence in the region and reflecting our commitment to our research and development programs.

• Also in October 2007, we unveiled a comprehensive solution for empowering IT organizations to achieve their increasingly challenging and business-critical governance, risk and compliance (GRC) objectives. The offering features CA GRC Manager, an innovative product that provides portfolio management of IT risks across the enterprise, as well as our industry-leading IT control automation solutions.

• Also in October 2007, we announced new versions of five solutions for IBM z/OS that strengthen and automate the protection of corporate IT resources, while helping with legal and regulatory compliance.

• In August 2007, we entered into a $1 billion five-year unsecured revolving credit facility that will expire August 2012. The new facility replaced a prior $1 billion four-year facility that was due to expire in December 2008.

• Also in August 2007, we announced a new release of CA Unicenter Service Catalog that helps enable IT managers to define and deliver IT services in business terms.

• Also in August 2007, we announced new versions of three mainframe application quality assurance and testing solutions that help organizations more effectively leverage their legacy application investments within a SOA environment.

• In April 2007, we announced the next step in the fulfillment of our EITM vision with an innovative Unified Service Model and an accompanying set of solutions that empower IT to drive business growth and innovation to transform the way companies govern, manage and secure IT.

• Also in April 2007, we formed an organization to develop and package solutions that focus on companies with revenue of $100 million to $1 billion to enhance our presence in the mid-market.

• We made the following key additions and changes to our executive management team and Board of Directors:


• In April 2008, Arthur F. Weinbach was elected to our Board of Directors and named to the Board’s Compensation and Human Resources Committee.

• In March 2008, we named Michael J. Christenson as CA’s President. He continues as our Chief Operating Officer, reporting to our Chief Executive Officer, John A. Swainson. Mr. Christenson oversees our direct and indirect sales, services, technical support, business development and strategic alliances.

• In January 2008, we announced greatly expanded roles for Dr. Ajei Gopal, Executive Vice President of the EITM Group, which encompasses a number of our key growth areas, and for Jacob Lamm, Executive Vice President of the Governance Group, which has a specific focus on the business governance market, an emerging and potentially large market for the Company. These appointments follow their promotions to our Executive Leadership Team in May 2007. They continue to report to Mr. Swainson.

• In December 2007, we promoted Una O’Neill to Executive Vice President and General Manager of CA Services and to our Executive Leadership Team. She continues to report to Mr. Christenson.

• In June 2007, William E. McCracken succeeded Lewis S. Ranieri as Chairman of CA’s Board of Directors. Mr. Ranieri remained a Director until his retirement in December 2007.

• In May 2007, we promoted George Fischer to Executive Vice President of Worldwide Direct Sales and John Ruthven to Executive Vice President of Worldwide Sales Operations. Mr. Fischer and Mr. Ruthven were also promoted to our Executive Leadership team and continue to report to Mr. Christenson.

• In April 2007, Raymond J. Bromark was elected to our Board of Directors, named to the Board’s Audit and Compliance Committee, of which he was named Chairman in October 2007, and named to the Board’s Strategy Committee.

(b) Financial Information About Segments
Our global business consists of a single industry segment — the design, development, marketing, licensing, and support of IT management software products that operate on a wide range of hardware platforms and operating systems. Refer to Note 5, “Segment and Geographic Information,” in the Notes to the Consolidated Financial Statements for financial data pertaining to our segment and geographic operations.

(c) Narrative Description of the Business
As the world’s leading independent IT management software company, we help companies use IT to better perform, innovate, compete and grow. We believe our value proposition is unique: We provide software that unifies and simplifies complex IT management across an enterprise to improve business results. Our EITM vision, solutions and expertise help customers govern, manage and secure IT to manage cost and risk, improve service and ensure that IT is enabling their businesses to succeed.

We believe this has become important to companies because IT is more critical to running their businesses than ever. Companies rely on IT to conduct day-to-day business, and they are increasingly using IT to do more, such as drive innovation, comply with regulations, manage resources better and manage their energy consumption, enabling them to increase revenue and profit. We believe that to take full advantage of what IT can do for a business requires management and integration. Companies must be able to manage IT as a whole and not as islands of technology isolated from the business and unable to work together. Organizations need to be able to support and drive efficiencies in existing technologies, incorporate new technologies such as mobile devices and service-oriented architectures, and use best practice processes across IT while handling the daily business pressures of competition and profitability.

Our mission is to transform the way our customers manage IT and EITM is our vision of how we can help organizations accomplish this. With EITM, we enable customers to take advantage of what IT can do for their business by unifying disparate elements of IT — systems, processes and people — and using technology and automation to simplify complex IT management. Rather than replacing existing IT investments, customers can gain visibility and control in order to better manage what they already have in place — whether it is a distributed or mainframe environment, and regardless of the hardware or software they are using.

We believe we have a unique competitive advantage in the marketplace with the breadth and quality of our products and solutions and their ease of integration with existing customer technology investments; the depth of our technical expertise; our commitment to open standards and innovation; our independence, which means we do not have a preferred hardware, software or operating system platform agenda; our ability to work with customers from planning through implementation; and our ability to offer solutions that are modular, open and integrated so that customers can use them at their own pace individually or in combination with their existing technology.

Because integration is so important, we provide a unifying platform, or what we call our Unified Service Model, to bring the management of IT all together and help customers gain the most value from their IT. We think of our Unified Service Model as providing a “blueprint” of the services IT offers to the business. Our Unified Service Model lets our customers see how the different elements of IT — hardware, software and staff — work together to deliver a complete service. The Unified Service Model, together with our solutions, provides a complete 360-degree view of a service — with insight into costs, risks, entitlements and service levels so customers can manage IT more effectively. All of our solutions are integrated through the CA Integration Platform, which is the architectural foundation for our products.

Business Strategy
We continue to pursue a strategy to: enable our customers to realize increasing levels of value from their IT investments through our EITM vision and enterprise management software products, solutions and services; maintain a relationship focus with our customers; accelerate our market growth; and improve our competitive profitability. We strive to do this in a number of ways, including by:


• Concentrating on areas where we can maintain or achieve market leadership and respond to our customers’ needs for improved IT management . Many of our solutions are recognized by industry analysts as being among the leaders in their categories.

• Developing, delivering and supporting products and services customers want and need to manage their IT investments effectively . We believe our relationship-oriented approach to our customers allows us to better understand and meet their needs. Our product development, services, education and technical support capabilities are designed to serve our customers from our initial discussion through implementation and ongoing support.

Business Organization
Overview
Our Company is organized to support our business strategy, from how we develop and deliver products and services to how we market and sell our software to how we support our technology.

Our product development efforts are aligned with our customers’ needs to govern, manage and secure IT. We group our products based on areas of focus where we believe we have the greatest growth opportunities and leading solutions. These areas include: infrastructure management, project and portfolio management, IT security management, service management, data center automation and application performance management. These areas are in addition to our continued commitment to mainframe and storage solutions, as well as our pursuit of the emerging business governance market. We do not presently maintain profit and loss data on these focus areas, and they are therefore not considered business segments.

Govern
We help our customers make better decisions by giving them insight into their IT investments and risk from a single place. We view governance in terms of business governance and IT governance, which is addressed by CA Clarity tm , our leading solution for project and portfolio management. In October 2007, we expanded our governance capabilities to address increasingly challenging and business-critical GRC objectives of IT organizations. In particular, CA GRC Manager is an innovative product that provides portfolio management of IT risks across the enterprise, as well as CA’s industry-leading IT control automation solutions.

Manage
We make it easier to manage technology so that high-quality IT services can be delivered within our customers’ businesses at a competitive cost . We focus on service management; datacenter automation; application performance management, which includes offerings such as CA Wily Introscope ® ; and infrastructure management, which includes offerings such as CA SPECTRUM Network Fault Manager, CA eHealth ® Network Performance Manager and CA Unicenter ® Network and Systems Management. We augmented these capabilities in August 2007 when we announced a new release of CA Unicenter Service Catalog that helps IT managers to define and deliver IT services in business terms.

Secure
We ensure customers have secure access to the information, applications, systems and services they need to conduct their businesses . We focus on identity and access management, as well as security information management and threat management. In November 2007, we announced CA Identity and Access Management r12, a major new version of our offering that helps customers more securely and efficiently enable their businesses with Service Oriented Architecture (SOA) and Web services.

Sales and Marketing
We offer our solutions through our direct sales force, and indirectly through global systems integrators, value-added partners, original equipment manufacturers and distribution partners. We have a disciplined, structured and systematic selling process through which we concentrate on high-growth areas for both the distributed and mainframe environment including:


• infrastructure management

• project and portfolio management

• IT security management

• service management

• data center automation, and

• application performance management

These areas, along with our continued commitment to other core parts of our business such as mainframe, storage and business governance, allow us to address customer needs and deepen relationships while opening the door for us to cross-sell and up-sell additional solutions. We rely on our marketing organization to help us identify new market opportunities, provide fact-based insight on industry and customer trends, and build awareness of CA worldwide to help drive sales.

Our sales organization operates on a worldwide basis. We operate through branches, subsidiaries and partners around the world. Approximately 48% of our revenue in fiscal 2008 was from operations outside of the United States. As of March 31, 2008 and March 31, 2007, we had approximately 3,300 and 3,700 sales and sales support personnel, respectively. In certain smaller geographic locations, we may use our distribution and resale partners as our primary selling vehicle.

Partners
Partners are an integral part of our strategy. We need a broad base of partners to enable us to reach more customers, complement our expertise in niche areas and provide fulfillment and distribution. We partner with global systems integrators for their process design and planning as well as vertical expertise and work with companies including, but not limited to, Accenture, Deloitte, and PricewaterhouseCoopers.

We also work with value-added partners to offer enterprise solution implementation and we actively encourage them to market our software products. Value-added partners often combine our software products with specialized consulting services and provide enhanced, user-specific solutions to a particular market or sector. Facilities managers, including CSC, EDS, and IBM, often deliver IT services using our software products to companies that prefer to outsource their IT operations. In addition, we work with distribution partners who have specific market expertise.

Our organization that focuses on companies with revenue of $100 million to $1 billion delivers CA solutions to this market through partners to capitalize on the multi-billion dollar opportunity represented by the estimated 66,000 such companies around the world. As part of our commitment to this market, in February 2008, we announced a major new release of CA Recovery Management that enables companies to simplify management, tighten security and speed recovery of critical business information. CA Recovery Management includes new releases of CA ARCserve ® Backup, CA XOsoft tm High Availability and CA XOsoft tm Replication, offering channel partners and their customers the latest advances in data protection, business continuity and disaster recovery.

Customers
We have a large and broad base of customers, including the majority of companies in the Forbes Global 2000. Most of our revenue is generated from customers who have the ability to make substantial commitments to software and hardware implementations. Our software products are used in a broad range of industries, businesses and applications. We currently serve companies across every major industry worldwide including banks, insurance companies, other financial services providers, governmental agencies, manufacturers, technology companies, retailers, educational institutions and health care institutions.

When customers enter into software license agreements with us, they often pay for the right to use our software for a specified period of time. When the terms of these agreements expire, the customers must either renew the license agreements or pay usage and maintenance fees, if applicable, for the right to continue to use our software and/or receive support. Our customers’ satisfaction is important to us and we believe that our flexible business model allows us to maintain our customer base while allowing us the opportunity to cross-sell new software products and services to them.

No individual customer accounted for a material portion of our revenue during any of the past three fiscal years, or a material portion of the license contract value that has not yet been earned (deferred subscription value) reported at the end of any period in the past three fiscal years. As of March 31, 2008, four customers accounted for substantially all of our outstanding prior business model net receivables, which amounted to approximately $342 million, including one large IT outsourcing customer with a license arrangement that extends through fiscal 2012 with a net unbilled receivable balance of approximately $324 million. Refer to “Business Model” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for further information.

Competition
The markets in which we compete are marked by rapid technological change, the steady emergence of new companies and products, evolving industry standards, and changing customer needs. Competitive differentiators include, but are not limited to: industry vision, performance, quality, breadth of product group, expertise, integration of products, brand name recognition, price, functionality, customer support, frequency of upgrades and updates, manageability of products and reputation.

We compete with many established companies in the markets we serve. Some of these companies have substantially greater financial, marketing, and technological resources, larger distribution capabilities, earlier access to customers, and greater opportunity to address customers’ various information technology requirements than we do. These factors may provide our competitors with an advantage in penetrating markets with their products. We also compete with many smaller, less established companies that may be able to focus more effectively on specific product areas or markets. Because of the breadth of our product offerings, we compete with companies in specific product areas and in one instance, across all of our product areas. Some of our key competitors are IBM, BMC, HP, Cisco, EMC, Microsoft, Oracle and Symantec.

We believe that we are well positioned and have a competitive advantage in the marketplace with our EITM vision, the breadth and quality of our product offerings, our hardware and operating system independence, and the ability to offer our solutions as product modules or as integrated suites, so that customers can use them at their own pace. We continue our efforts to evolve the CA brand to consistently help the market understand the value we can deliver.

CEO BACKGROUND

Alfonse M. D’Amato , 70, has been a director since 1999. Senator D’Amato has been Managing Director of Park Strategies LLC, a business consulting firm, since January 1999. Senator D’Amato was a United States Senator from January 1981 until January 1999. During his tenure in the Senate, he served as Chairman of the Senate Committee on Banking, Housing and Urban Affairs, and Chairman of the Commission on Security and Cooperation in Europe.

Gary J. Fernandes , 64, has been a director since 2003. Mr. Fernandes has been Chairman and President of FLF Investments, a family business involved with the acquisition and management of commercial real estate properties and other assets, since 1999. Mr. Fernandes retired as Vice Chairman of Electronic Data Systems Corporation (“EDS”), a global technology services company, in 1998, after serving on the Board of Directors of EDS since 1981. After retiring from EDS, Mr. Fernandes founded Convergent Partners, a venture capital fund focusing on buyouts of technology-related companies. He also served as Chairman and CEO of GroceryWorks, Inc., an internet grocery fulfillment company, until 2001. He currently serves on the Board of Directors of BancTec, Inc., a privately held systems integration, manufacturing and services company, Blockbuster International, a provider of home entertainment services, and eTelecare Global Solutions, Inc., a provider of complex business process outsourcing solutions. Mr. Fernandes also serves as an advisory director of MHT Partners, a Dallas-based investment banking firm serving mid-market companies. He serves on the Board of Governors of Boys & Girls Clubs of America, and is a director of the Boys & Girls Club of Dallas. He also serves as a trustee of the O’Hara Trust and the Hall-Voyer Foundation.

Robert E. La Blanc , 74, has been a director since 2002. He has been Founder and President of Robert E. La Blanc Associates, Inc., an information technologies consulting and investment banking firm, since 1981. Mr. La Blanc was previously Vice Chairman of Continental Telecom Corporation and, before that, a general partner of Salomon Brothers, Inc. He is also Chairman and a director of Fibernet Telecom Group, Inc. and a director of a family of Prudential Mutual Funds.

Christopher B. Lofgren , 49, has been a director since 2005. He has been President and Chief Executive Officer of Schneider National, Inc., a provider of transportation, logistics and related services, since 2002. Prior to being appointed CEO, Mr. Lofgren served as Chief Operating Officer from 2000 to 2002, and Chief Information Officer from 1996 to 2002. Mr. Lofgren also serves on the Advisory Board of the School of Industrial and Systems Engineering at Georgia Tech, as a board member of the Green Bay, Wisconsin Boys & Girls Club, the Executive Committee and the Board of Directors of the American Trucking Associations, Inc. (“ATA”) and the Board of Directors of the American Transportation Research Institute, a research trust affiliated with the ATA.

William E. McCracken , 65, has been a director since 2005. He has been President of Executive Consulting Group, LLC since 2002. Mr. McCracken has been Chairman of the Board of the Company since June 2007. During a 36-year tenure at International Business Machines Corporation (“IBM”), Mr. McCracken held several different executive offices, including serving as general manager of the IBM Printing Systems Division and general manager of Worldwide Marketing of IBM PC Company. He is currently a member of the Board of Directors of IKON Office Solutions. He is also Chairman of the Board of Trustees of Lutheran Social Ministries of New Jersey.

John A. Swainson , 54, has been Chief Executive Officer of the Company since February 2005 and a director since November 2004. From November 2004 to February 2005, he served as our Chief Executive Officer-elect. From July to November 2004, Mr. Swainson was Vice President of Worldwide Sales and Marketing of the Software Group of IBM, responsible for selling its diverse line of software products through multiple channels. From 1997 to July 2004, he was General Manager of the Application Integration and Middleware division of IBM’s Software Group, a division he started in 1997. He is the lead director of Visa Inc., and is also a director of Cadence Design Systems, Inc., and the Ridgefield, Connecticut Symphony Orchestra Foundation.

Laura S. Unger , 47, has been a director since 2004. She was a Commissioner of the SEC from November 1997 to February 2002, including Acting Chairperson of the SEC from February to August 2001. From June 2002 through June 2003, Ms. Unger was employed by CNBC as a Regulatory Expert. Before being appointed to the SEC, Ms. Unger served as Counsel to the United States Senate Committee on Banking, Housing and Urban Affairs from October 1990 to November 1997. Prior to working on Capitol Hill, Ms. Unger was an attorney with the Enforcement Division of the SEC. Ms. Unger serves as a director of Ambac Financial Group, Inc., the IQ Funds Complex, and Children’s National Medical Center. She also acts as the Independent Consultant to JP Morgan Chase for the Global Analyst Conflict Settlement.

Arthur F. Weinbach , 65, has been a director since April 2008. He has been Executive Chairman and Chairman of the Board of Broadridge Financial Solutions, Inc., a financial services company, since April 2007. Mr. Weinbach was associated with Automatic Data Processing, Inc. (“ADP”), the predecessor of Broadridge Financial Solutions, Inc., from 1980 to 2007, serving as Chief Executive Officer from 1998 to 2006 and as Chairman until November 2007. He is also a director of Schering-Plough Corporation. He is also currently a Trustee of New Jersey SEEDS, a non-profit organization.

Renato (Ron) Zambonini , 61, has been a director since 2005. He was Chairman of the Board of Cognos Incorporated, a developer of business intelligence software, from May 2004 until January 2008, and a director from 1994 until January 2008. Mr. Zambonini was Chief Executive Officer of Cognos from September 1995 to May 2004 and President from January 1993 until April 2002.

MANAGEMENT DISCUSSION FROM LATEST 10K

Business Overview
We are the world’s leading independent information technology (IT) management software company, helping organizations use IT to better perform, compete, innovate and grow. We help customers govern, manage and secure their entire IT operation — all of the people, information, processes, systems, networks, applications and databases from a Web service to the mainframe, regardless of the hardware or software they are using.

We license our products worldwide, principally to large IT service providers, financial services companies, governmental agencies, retailers, manufacturers, educational institutions, and healthcare 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, value-added partners, original equipment manufacturers, and distribution partners.

CA’s Business Model
As described in greater detail in Part I, Item 1, “Business”, we license our software products directly to customers as well as through distributors, resellers and value-added resellers. We generate revenue from the following sources: license fees — licensing our products on a right-to-use basis; maintenance fees — providing customer technical support and product enhancements; and service fees — providing professional services such as product implementation, consulting and education. The timing and amount of fees recognized as revenue during a reporting period are determined in accordance with generally accepted accounting principles in the United States of America (GAAP).

Under our business model, we offer customers a wide range of licensing options, including the flexibility to license software under month-to-month licenses or to fix their costs by committing to longer-term agreements. Licenses sold for most of our software products permit customers to change their software product mix as their business and technology needs change, which includes the right to receive software products in the future within defined product lines for no additional fee, commonly referred to as unspecified future software products. In such instances, we do not have vendor-specific objective evidence (VSOE) for the fair value of the undelivered elements, and we are therefore required under GAAP to recognize revenue from such license agreements evenly on a monthly basis (also known as ratably) over the license term.

Under our business model, a relatively small percentage of our revenue is recognized on a perpetual or up-front basis once all revenue recognition criteria are met in accordance with Statement of Position 97-2 “ Software Revenue Recognition ” (SOP 97-2) (see “Critical Accounting Policies and Estimates” below for details). In such cases, these products are not sold with the right to receive unspecified future software products and VSOE has been established for maintenance. We expect to continue to offer these types of licensing arrangements; therefore, the amount of revenue we expect to recognize on an up-front basis may increase to the extent that such license agreements are not executed within a short time frame of other agreements with the same customer or in contemplation of other license agreements with the same customer for which the right exists to receive unspecified future software products.

Some contracts executed prior to October 2000 (the prior business model) remain in effect and have not been renewed under license arrangements that contain the right to receive unspecific future software products. Under those agreements, and as is common practice in the software industry, we did not offer our customers the right to receive unspecified future software products and we were required under GAAP to record the present value of the license agreement as revenue at the time the license agreement was signed. As these customer license agreements are renewed under our current licensing model, we expect to see an increase in deferred subscription value related to these licenses, from which subscription revenue will be amortized in future periods. Total deferred subscription value is also expected to increase as we transition acquired company contracts to our business model, sell additional products and capacity to existing customers, and enter into new contracts with new customers. The favorable impact on subscription revenue from the conversion of contracts from our prior business model to our business model is decreasing over time as the transition is completed. The remaining balance of unbilled installment receivables that were previously recognized as revenue under our prior business model was $0.40 billion and $0.50 billion as of March 31, 2008 and March 31, 2007, respectively.

Under our license agreements, customers generally make installment payments for the right to use our software products over the term of the associated software license agreement. While the timing of revenue recognition is affected by the offering of unspecified future software products, it generally has not changed the timing of how we bill and collect cash from customers and as a result, our cash generated from operations has generally not been affected by the offering of unspecified future software products.

Significant Business Events


Acquisitions and Divestitures
In November 2006, we sold our interest in Benit for $3 million.

In September 2006, we acquired Cendura Corporation a privately held provider of IT service management and application service delivery solutions.

In July 2006, we acquired XOsoft, Inc. (XOsoft), a privately held company that provided continuous application availability solutions that minimize application downtime and accelerate time to recovery.

In June 2006, we acquired MDY Group International, Inc., a provider of enterprise records management software and services.

In May 2006, we acquired Cybermation Inc., a privately held provider of enterprise workload automation solutions.

In March 2006, we acquired the common stock of Wily Technology, Inc., a provider of enterprise application management solutions.

In December 2005, we acquired Control F-1 Corporation, a privately held provider of support automation solutions that automatically prevent, detect and repair end-user computer problems before they disrupt critical IT services.

In December 2005, we sold our wholly-owned subsidiary MultiGen-Paradigm, Inc. (MultiGen). MultiGen was a provider of real-time, end-to-end 3D solutions for visualizations, simulations and training applications used for both civilian and governmental purposes.

In November 2005, we announced an agreement with Garnett & Helfrich Capital, a private equity firm, to create an independent corporate entity, Ingres Corporation. We divested our Ingres ® open source database unit into Ingres Corporation, of which Garnett & Helfrich Capital is the majority shareholder and we hold a minority position.

In October 2005, we acquired iLumin Software Services, Inc., a privately held provider of enterprise message management and archiving software.

In July 2005, we acquired Niku Corporation (Niku), a provider of information technology management and governance solutions.

In June 2005, we acquired Concord Communications, Inc. (Concord), a provider of network service management software solutions.

Performance Indicators
Management uses several quantitative performance indicators to assess our financial results and condition. Each provides a measurement of the performance of our business model and how well we are executing our plan.

Our predominantly subscription-based business model is unique among our competitors in the software industry and it may be difficult to compare our results for many of our performance indicators with those of our competitors. The

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. The performance indicators discussed below are those that we believe are unique because of our subscription-based business model.

Subscription and Maintenance Revenue — Subscription and maintenance revenue is the amount of revenue recognized ratably during the reporting period from either: (i) subscription license agreements that were in effect during the period, which generally include maintenance that is bundled with and not separately identifiable from software usage fees or product sales, or (ii) maintenance agreements associated with providing customer technical support and access to software fixes and upgrades which are separately identifiable from software usage fees or product sales.

New Deferred Subscription Value — New deferred subscription value is the aggregate incremental amount we expect to collect from our customers over the terms of the underlying subscription license agreements entered into during a reporting period. These amounts relate to the sale of products, by distributors, resellers and value-added resellers to end-users, where the contracts incorporate the right for end-users to receive unspecified future software products. These amounts are recognized ratably as subscription revenue over the applicable software license terms. New deferred subscription value typically excludes the value associated with certain “perpetual” based licenses, maintenance-only license agreements, license-only indirect sales, and professional services arrangements.

The license agreements that contribute to new deferred subscription value represent binding payment commitments by customers over periods generally up to three years, although in certain cases customer commitments can be for longer periods. The amount of new deferred subscription value recorded in a period is affected by the volume and amount of contracts renewed during that period. Typically, our new deferred subscription value increases in each consecutive quarter during a fiscal year, with the first quarter being the weakest and the fourth quarter being the strongest. However, as we make efforts to improve the balance of the distribution of our contract renewals throughout the fiscal year, new deferred subscription value may not always follow the pattern of increasing in consecutive quarters during a fiscal year, and the quarter to quarter differences in new deferred subscription value may be more moderate. Additionally, changes in new deferred subscription value, relative to previous periods, do not necessarily correlate to changes in billings or cash receipts, relative to previous periods. The contribution to current period revenue from new deferred subscription value from any single license agreement is relatively small, since revenue is recognized ratably over the applicable license agreement term.

Weighted Average License Agreement Duration in Years — The weighted average license agreement duration in years for our direct business reflects the duration of all software licenses executed during a period, weighted to reflect the contract value of each individual software license. The weighted average duration is affected by the number and dollar amounts of contracts signed during the period, and therefore may change from period to period and will not necessarily correlate to the prior year periods. If the weighted average life of our subscription license agreements remains constant, an increase in deferred subscription value will ultimately result in an increase in subscription revenue in future periods.

Annualized new deferred subscription value represents the annual amount of new deferred subscription value to be recognized as subscription revenue from our direct business in future years based on the weighted average duration of the underlying contracts. It is calculated by dividing the total value of all new term-based software license agreements entered into during a period in our direct business by the weighted average life of all such license agreements recorded during the same period. The annualized new deferred subscription value measures the revenue to be realized on an annual basis from the contracts signed.

Total Revenue Backlog — Total revenue backlog represents the aggregate amount the Company expects to recognize as revenue in the future as either subscription and maintenance revenue or professional services revenue associated with contractually committed amounts billed or to be billed as of the balance sheet date. Total revenue backlog is comprised of amounts recognized as a liability in our consolidated balance sheets as “deferred revenue — billed or collected” as well as unearned amounts associated with balances yet to be billed under subscription, maintenance and professional service agreements. Amounts are classified as current or non-current depending on when they are expected to be earned and therefore recognized as revenue. We refer to the portion of total revenue backlog that relates to subscription and maintenance licenses as deferred subscription value. Deferred subscription value is recognized as revenue evenly on a monthly basis over the duration of the underlying license agreements and is reported as “Subscription and maintenance revenue” line in our Consolidated Statements of Operations.

Results of Operations
The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for fiscal 2008, 2007 and 2006 and the period-over-period dollar and percentage changes for those line items. Dollar amounts are expressed in millions. Certain prior year balances have been reclassified to conform to the current period’s presentation.

Fiscal 2008 Compared with Fiscal 2007
Operating Activities
Cash generated by continuing operating activities for fiscal 2008 was $1.10 billion, representing a slight increase of $35 million compared with fiscal 2007. The increase was driven primarily by higher collections of $100 million, including an increase of $64 million from single-installment receipts, and lower disbursements to vendors and lower payroll related disbursements of $76 million. These amounts were partly offset by higher cash payments for income taxes and interest payments.

Investing Activities
Cash used in investing activities for fiscal 2008 was $219 million compared with $202 million for fiscal 2007. Cash paid for acquisitions, net of cash acquired, was $27 million for fiscal 2008 compared with $212 million for fiscal 2007. Proceeds from the sale of assets were $46 million for fiscal 2008, compared with $223 million in fiscal 2007, which included proceeds on the sale-leaseback of our corporate headquarters in Islandia, New York of $201 million. In fiscal 2008, the Company had net purchases of marketable securities of $3 million compared with proceeds from sales of marketable securities in fiscal 2007 of $44 million.

Financing Activities
Cash used in financing activities for fiscal 2008 was $572 million compared with $515 million in fiscal 2007. During fiscal 2008, we repurchased $500 million of our own common stock, compared with $1.21 billion in fiscal 2007. Partially offsetting the share repurchases in fiscal 2007 was an increase in borrowings of $750 million under our 2004 Revolving Credit Facility. In the second quarter of fiscal 2008, we repaid our 2004 Revolving Credit Facility with proceeds from our new 2008 Revolving Credit Facility. During fiscal 2008, we paid dividends of $82 million, compared with $88 million in fiscal 2007.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

RESULTS OF OPERATIONS
The following table presents changes in the line items on our Condensed Consolidated Statement of Operations for the three- and six-month periods ended September 30, 2008 and 2007 measured by Dollar Change, Percentage of Dollar Change, and Percentage of Total Revenue.

Revenue
The increase in total revenue for both the three- and six-month periods ended September 30, 2008 was primarily due to growth in subscription and maintenance revenue. Total revenue was favorably impacted by foreign exchange of approximately $42 million and $100 million for the three- and six-month periods ended September 30, 2008, respectively.
Price changes do not have a material impact on revenue in a given period as a result of our ratable subscription model.
Subscription and Maintenance Revenue
Subscription and maintenance revenue is the amount of revenue recognized ratably during the reporting period from both: (i) subscription license agreements that were in effect during the period, which generally include maintenance that is bundled with and not separately identifiable from software usage fees or product sales, and (ii) maintenance agreements associated with providing customer technical support and access to software fixes and upgrades which are separately identifiable from software usage fees or product sales.

Subscription and Maintenance Bookings
For the three-month periods ended September 30, 2008 and 2007, we added subscription and maintenance bookings of $1,393 million and $897 million, respectively. For the six-months ended September 30, 2008 and 2007, we added subscription and maintenance bookings of $2,311 million and $1,659 million, respectively. The increase in subscription and maintenance bookings was primarily attributable to an increase in the duration and dollar amounts of large contracts entered into, the growth in sales of new products, mainframe capacity, continued improvement in the management of contract renewals, and foreign exchange during the second quarter and first half of fiscal 2009 as compared with the prior year periods. During the second quarter of fiscal 2009, we renewed 17 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $892 million. This is compared with the prior fiscal year’s second quarter, when 16 license agreements with incremental contract values were renewed in excess of $10 million each, for an aggregate contract value of $334 million. The weighted average duration of subscription and maintenance agreements executed in the second quarter of fiscal 2009 and 2008 was 4.14 and 2.97 years, respectively. Annualized subscription and maintenance bookings for the second quarter of fiscal 2009 increased $34 million, or 11%, from the second quarter of fiscal 2008, to $336 million. The increase in aggregate contract value and weighted average duration of subscription and maintenance agreements was primarily attributable to the signing of several large contract extensions with terms of approximately five years, two of which added approximately $550 million to total subscription and maintenance bookings.
Professional Services
Professional services revenue was relatively consistent for the second quarter and first half of fiscal 2009 as compared with the second quarter and first half of fiscal 2008 as revenue increases due to foreign exchange of $3 million and $8 million, respectively, were offset by revenue decreases in the APJ (Asia Pacific Japan) region, mostly due to our change in that region from a direct to an indirect sales model, and our concerted efforts to reduce the number of low margin service contracts.
Software Fees and Other
Software fees and other revenue primarily consists of revenue that is recognized on an up-front basis as required by SOP 97-2. This includes revenue generated through transactions with distribution and original equipment manufacturer channel partners (sometimes referred to as our “indirect” or “channel” revenue) and certain revenue associated with new or acquired products sold on an up-front basis. Also included is financing fee revenue, which results from the discounting of product sales recognized on an up-front basis with extended payment terms to present value. Revenue recognized on an up-front basis results in higher revenue for the current period than if the same revenue had been recognized ratably under our subscription model.
The increase for the six-month period ended September 30, 2008 as compared with the six month period ended September 30, 2007 was primarily attributable to an increase in revenue recorded on an up-front basis relating to our indirect business.

Total Revenue by Geography
The following table presents revenue earned from the United States and international geographic regions and corresponding percentage changes for the three- and six-month periods ended September 30, 2008 and 2007, respectively. Past financial results are not necessarily indicative of future results.

Revenue in the United States increased by 3% and 2%, for the three- and six-month periods ended September 30, 2008 as compared with the prior year comparable periods, respectively. International revenue increased by approximately 5%, and 8%, respectively for the three- and six-month periods ended September 30, 2008, principally due to favorable impacts from foreign exchange of $42 and $100 million for the three- and six-month periods, respectively.
Expenses
Effective with the filing of the first quarter of fiscal year 2009 Quarterly Report on Form 10-Q, the Company further refined the classification of certain costs reported on its Condensed Consolidated Statement of Operations to better reflect the allocation of various expenses and to better align the Company’s reported financial statements with the Company’s internal view of its business performance. This refinement increased the amounts reported for the three-month periods ended September 30, 2007 in the “Cost of professional services,” “Selling and marketing,” and “Product development and enhancements” line items by $3 million, $21 million and $2 million, respectively, and decreased the amount reported in “General and administrative” by $26 million. Total expenses before income taxes and net income were not affected by these reclassifications.
This refinement increased the amounts reported for the six-month periods ended September 30, 2007 in the “Costs of licensing and maintenance,” “Cost of professional services,” “Selling and marketing,” and “Product development and enhancements” line items by $3 million, $8 million, $33 million and $5 million, respectively, and decreased the amount reported in “General and administrative” by $49 million. Total expenses before income taxes and net income were not affected by these reclassifications.
Costs of Licensing and Maintenance
Costs of licensing and maintenance includes technical support, royalties, and other manufacturing and distribution costs. The increase in costs of licensing and maintenance for the second quarter and first half of fiscal 2009 as compared with the prior year periods was primarily due to the strategic partnership agreement that we signed with an outside third party relating to our Internet Security business during the fourth quarter of fiscal 2008, under which fees are paid based on sales volumes. Prior to this strategic partnership, the development costs relating to this business were included in Product Development and Enhancements. These cost increases were partially offset by decreases in product support expenses.
Cost of Professional Services
Cost of professional services consists primarily of our personnel-related costs associated with providing professional services and training to customers. The decrease in cost of professional services for the second quarter and first half of fiscal 2009 as compared with the prior year periods was primarily due to the reduced use of external consultants and reduced personnel costs resulting in savings realized from the fiscal 2007 cost reduction and restructuring plan (fiscal 2007 plan). For further information on the fiscal 2007 plan refer to Note H, “Restructuring and Other,” in the Notes to the Condensed Consolidated Financial Statements.
As a result of the decreased costs of professional services, the margins on professional services revenue improved in the second quarter and first half of fiscal 2009 as compared with the prior year periods.

CONF CALL

Joseph Doncheski - Vice President of Investor Relations

Thank you and good afternoon everyone. Welcome to CA’s second quarter 2009 earnings call. I am Joseph Doncheski, Vice President of Investor Relations for CA. Joining me today are John Swainson, our Chief Executive Officer and Nancy Cooper, our Chief Financial Officer.

As a reminder this conference call is being broadcast on Wednesday, October 29, 2008 over the phone and the Internet to all interested parties. The information shared in this call is effective as of today’s date and will not be updated. All content is the property of CA and is protected by US and International Copyright Law and may not be reproduced, transcribed or produced in any way without the expressed written consent of CA. We consider your continued participation in this call as consent to our recording.

During this call non-GAAP financial measures will be discussed. Reconciliations to the most directly comparable GAAP financial measures are included in the earnings release which was file on Form 8-K earlier today and the supplemental information package. These documents are available on our website at investor.ca.com. Today’s discussion will include forward-looking statements subject to risks and uncertainties and actual results could differ materially from these forward-looking statements. Please refer to our SEC filings for a detailed discussion of potential risks.

With that, I’ll turn the call over to John Swainson.

John Swainson - Chief Executive Officer

Thanks Joe. Good afternoon and thank you for joining us. I’m going to start with a few comments on the current economic environment and our second quarter performance. Then I will turn it over to Nancy Cooper who will take you through the numbers before opining up for your questions. I will then return with some brief closing remarks.

I am pleased that CA had another solid quarter in what we can all agree is a challenging economic environment. We executed well, driving bookings and profit, cost improvements and cash flow. I am proud of the way our employees have risen to the occasion and kept to the task of serving our customers. We continue to improve our business operations on a daily basis.

Based on our first half performance and our outlook for the second half, we are increasing our guidance for GAAP and non-GAAP earnings per share, cash flow from operations, and bookings for our current fiscal year that ends on March 31, 2009. In addition, we're updating our revenue outlook to indicate that we anticipate that our full year total revenue growth will be at the lower end of our guidance. We also announced today that our Board of Directors has authorized the company to buy back up to $250 million of our common stock. This action demonstrates our confidence in CA's long term value and in our ability to build shareholder value.

As I said, we're operating in a challenging environment, but I believe we're well suited to navigate these current economic circumstances. Let me take a few minute to tell you why.

First off, our subscription business model is reliable. As all of you know, we come into each quarter with a substantial portion of our revenue already known. While this does not make us immune from current economic conditions, it does give us the ability to continue to make decisions with a long term outlook. Other advantage is that the majority of our customer contracts are long term, from three to five years, and that more than half of our revenue comes from our mainframe business which is based largely on capacity and maintenance. Mainframe relationships tend to be longer due to the maturity of the product line and the way our software is deeply embedded in our customers’ operations.

Like our mainframe products, our distributed products focus on helping customers increase efficiency, cut cost and mitigate risk. Always important, but even more so in an economic downturn. These three factors help provide stability to our renewal portfolio and help us capitalize on new selling opportunities.

During the quarter, we signed several large contracts including one with a large systems integrator and a number with financial services institutions. These large deals, which were renewals of our existing contracts, included additional mainframe capacity and the sale of new CA technology. They had very good economics for CA as well as for our customers. While these deals resulted in little short term impact in our second quarter results beyond the favorable impact on bookings but benefit from these contracts will be felt in future quarters as we have cemented on our relationships with these valuable customers for a number of years to come. I am pleased that we were able to make these renewals in the current economic environment particularly the ones in the banking industry, which I believe demonstrates the value we provided to customers in that sector.

Second, I believe that the role CA products play in the data center will be even more important as companies improve their IT operations to enable their business success. All of the advancements in IT; things like virtualization, cloud computing and software as a service add layers of complexity in an already complex system. It is managing that complexity where CA really excels. At no time will the performances of IT systems be more important than it is right now.

Thirdly, we have been working continually over the last three years on cost structure improvements and putting in place the business process changes that will improve our operations. Over this period, we have eliminated and shifted headcount, reduced our facilities footprint, and made substantial investments in internal systems and processes and in new products. These efforts have resulted in cost savings, which are reflected in our operating margin which has improved to about 30%. Equally important, we have used this discipline to ensure that we have resources available to invest in our business and capitalize on market opportunities. We are not done. We will continue to focus on cost structure efficiency improvements and are making the investments in product development and our sales force that will provide the solutions and relationships required to capture market share.

Finally, I know all of you are aware of our large footprint in the financial services industry, and about a third of our business comes from this sector, which we define as banks, insurance companies and brokerage firms. The majority of these arrangements are for the renewal of capacity and maintenance of our products, over periods ranging from three to five years.

We have assessed our deferred revenue portfolio and the near-term implications on revenue over the rest of our fiscal year. These are minor and can be strategically managed. Long-term, we may see some pricing pressure when these contracts renew over the next couple of years. As we have done in the past, due to the staggered nature of our renewals, we can and will mitigate these situations by selling increased capacity, new products and winning new customers.

To our benefit, we have relationships with virtually all of the large companies in financial services and have had the opportunity to demonstrate our value and expand our relationship over the years as the sector has consolidated. To some degree, financial industry consolidation is a trend that we are accustomed to and we believe that the mission critical data intensive transaction processing that’s done in this industry will continue to require CA software and that our software value will increase as consolidation continues and IT systems are integrated.

Generally as we have seen in the past, financial services consolidations, the underlying accounts, customers and service requirements don’t go away, they just move to a new company. There are still transactions that you need to be cautious regardless of the name on the door. Our value is ensuring that these transactions are done efficiently, cost effectively and securely.

Let me now take you through some second quarter highlights.

Total bookings were strong up 44% over the same period last year. Our booking strength was led, as I said, by the signing of a number of large deals. Several of these deals were five year renewals and that helped increase the average contract length. In this environment, we will gladly sign long term deals if they make economic sense for CA and our customers, particularly if they promote strong long term relationships. However, in general we still target contract lengths in the three year range.

We also saw considerable growth in new mainframe capacity and maintenance. Our mainframe business continues to perform well as more companies are adding capacity due to the momentum behind IBM’s release of the z10. Sales of infrastructure management solution based on our Enterprise IT Management strategy excelled in the quarter. In this area, we saw increased demand for our eHealth and SPECTRUM and service management offering. We also saw very strong demand for our application performance management solutions and our IT government solution.

Our revenue was up 4%. Non-GAAP earnings per share grew year-over-year at 28%, driven in part by our long term focus on business process improvement and expense management. And cash flow from operations was $218 million. These were the highlights. Let me now talk about the advances we have made in bringing industry leading technology solutions to the market and value to our customers.

As I told you on our June quarter earnings call, we planned a major products launch in October. And a few weeks ago we had that announcement which featured 10 new and upgraded products, including CA's data center automation manager, our exciting new offering that helps customers automate the dynamic provisioning of physical and virtual IT environments. This was our second major launch this year. And it featured CA developed products that help customers adapt to change, capitalize on new opportunities and control costs. The announcement represented the next step forward in our enterprise IT management strategy. And it focused on enabling customers to derive more business value from IT. You'll see even more of this at CA World in November. Without question, we're operating in a very competitive environment, but we are winning.

Let me provide you with just two examples. NETCOM, which is the network enterprise technology command is responsible for communications capabilities across the US Army. This organization, which calls itself the voice of the Army, turned to CA to standardize its infrastructure management tools. NETCOMs needs were clear. It needed to consolidate its IT infrastructure, standardize on a common solution and refresh its capabilities to fulfill current and future responsibility. Working together with the NETCOM IT team, we created an end-to-end management infrastructure using CAs Spectrum and E-Health solutions, to keep Army’s critical networks available and reliable and at the same time to reduce their operational costs considerably. I am very pleased with the progress we're making in the government sector. Several years ago, I made growing our sales in federal a business priority and we're seeing the results.

The second win I'd like to discuss is Intuit who are the premier provider of software for tax preparation in the United States. Intuit needed a solution to provide end-to-end monitoring of its IT infrastructure to ensure that its systems to ensure that its systems don't go down and they turned to CA, we provided them with our Wily application performance management solution which will ensure that all of Intuit's critical systems are operating efficiently during the 2008 tax filing system and beyond. With more than 68 million Americans filing tax returns using Intuit's Turbo Tax software, it's clear that a system outage would be catastrophic. The partnership between CA and Intuit will go a long way to making sure this doesn't happen.

Now let me turn it over to Nancy. Nancy?

Nancy Cooper - Chief Financial Officer

Thanks, John. Good afternoon everyone and thanks for joining us. I'll begin by reviewing our second quarter financials, update our outlook for fiscal 2009, and then comment on today's stock buyback announcement.

I'll begin with total bookings which increased 44% to 1.5 billion, compared to the year-ago period. The weighted average life of subscription and maintenance bookings was 4.14 years as compared to 2.97 years in the prior year period. When annualized, the year-over-year increase in subscription and maintenance bookings for the quarter was 11%, or 8% on a constant currency basis. North America and EMEA drove booking strength in the quarter. We saw continued momentum in our mainframe business from IBM's introduction of the z10 with bookings of mainframe capacity showing strong growth.

Likewise, we saw growth in new license sales in both our mainframe and distributed businesses. While this can fluctuate period to period, we are seeing traction in our ability to sell new licenses to new and existing customers. We believe the mix of our reliable, renewal business and the strength in our new license sales positions us to continue improving our bookings performance in the future. While we are pleased by the bookings performance in the quarter, it's important to note how bookings translate into revenue.

Revenue can be impacted by the composition of bookings, including terms of duration, mix, signing of renewals, and whether the license is upfront or ratable. Bookings from renewals may not translate to incremental revenue until later periods.

Total revenue in the quarter was $1.107 billion, up 4% from the prior year, or flat on a constant currency basis. Our continued focus on professional services profitability worldwide and APJs transition to an indirect model will continue to impact revenue over the next couple of quarters. Benefiting revenue in the second half and while revenue growth increases is a continued roll-off of our fiscal year '06 bookings which is being replaced by a stronger fiscal year '09 book of business. We enter any given quarter with over 80% of our revenue rolling off from the balance sheet. This highlights the resiliency and visibility of our subscription model, which is particularly valuable in the current economic climate. The ability to maintain but also grow our backlog in the current environment speaks to the sticky nature of our software and this revenue backlog grew 13% in the quarter, which bodes well for the growth in future fiscal years.

From a geographic perspective, North American revenue in the quarter was up 3% over the prior year and international revenue increased 4% or down 4% on a constant currency basis. Non-GAAP operating expenses for the quarter were 762 million down 70 million or 2% from the prior year or down approximately $60 million or about 8% when all impacts of currency are eliminated.

Non-GAAP operating income before interest and taxes for the quarter was 345 million up 20% from the prior year. Non-GAAP operating margin for the quarter was 31% a year-over-year increase of four percentage points. Non-GAAP operating margin excluding stock-based compensation was 2 points higher or 33%.

Our ongoing focus on optimizing our cost structure and driving further operating efficiencies continues to drive margin expansion. These initiatives have resulted in annualized savings of about $300 million. Since we are realizing the benefits faster than previously indicated, we now expect full year non-GAAP operating margins between 29 and 30% or 3 to 4 points higher than last year. Non-GAAP income for the quarter was $219 and non-GAAP EPS was $0.41 increasing 27 and 28% from the prior year respectively.

Now let’s turn to our GAAP results, which include purchase software, intangible amortization, restructuring and other expenses and gains and losses on hedges of operating income relating to future periods. Including these items total expenses before interest and taxes for the quarter was 777 million, down 6% from the prior year.

Now to finish up the income statement GAAP income for the quarter was 209 million or $0.39 per diluted common share increasing 53 and 50% from the prior year respectively.

Cash flow from operations in the quarter was 218 million a year-over-year increase of 25 million. Cash flow strength in the quarter was driven by a decrease in disbursement primarily related to payroll. We are also pleased that the cash collections were up slightly and in the current environment we were able to achieve a year-over-year decline in DSO. Cash collections from single and installments were flat in the quarter and down for the first half versus prior year periods. Also down as a percentage of total product bookings for both the quarter and the first half versus prior year periods.

Now completing the balance sheet, we ended the quarter with 2.4 billion in cash and cash equivalents and 2.2 billion of total debt bringing our net cash position to $161 million. Also given the uncertainty surrounding the current financial markets it is important to stress that our cash is invested conservatively. We are also mindful of our debt maturities in calendar year '09 and have the ability to redeem them with cash on hand.

Earlier I referenced the strength of our balance sheet. In our subscription model there are two foundations for future financial performance. The first of these is the revenue backlog which this quarter grew by 13% from the prior year and exceeded $7 billion in the quarter. This revenue backlog combined with billings backlog growth of 19% and total expected future cash collections growth of 13% gives me confident in CA's strengthening fundamentals. This is revenue and cash under contract for the future.

Now with that let's discuss our updated guidance for fiscal year 2009. We expect revenue growth to be at the lower end of guidance in constant currency at 2%. At current foreign currency exchange rates this translates to reported revenue of about 4.3 billion which reflects the recent strengthening of the US dollar.

Total booking growth increases to 10 to 15% from the previous guidance of mid to high single digits, primarily resulting from the longer duration in the first half. Non-GAAP EPS increases to a $1.48 to $1.55 from a $1.45 to $1.52 representing a 24 to 30% growth. GAAP EPS increases to $1.31 to $1.38 from a $1.28 to $1.35, representing 41 to 48% growth inclusive of approximately 30 million of restructuring charges. Both GAAP and non-GAAP EPS guidance factors in a currency adjustment of $0.08 in the second half of the year due to the strengthening dollar. And cash flow from operations increases to 1.15 billion to 1.2 billion from 1.15 billion to 1.8 billion, representing a 4 to 9% growth. This includes about 120 million in restructuring payments and relatively flat cash taxes.

Except as previously stated guidance reflects current foreign currency exchange rates, assumes no material acquisitions, and a partial hedge of our operating income. We continue to expect approximately 570 million actual shares outstanding and weighted average diluted share count of approximately 541 million shares and a full year tax rate on non-GAAP income of approximately 37%.

Finally, we announced today that our Board has authorized a new 250 million stock repurchase plan. This move is reflective of the Board’s continued confidence in CA's market opportunity and long term strategy. Our strong cash position and cash generating capability allows us to opportunistically repurchase shares at attractive levels with cash on hand. Current guidance does not reflect the impact of share repurchase. I feel good about our performance in the second quarter and the opportunities we see for the second half of the year.

And with that, let’s open up the call for questions.

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