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 incorporation or organization)		(I.R.S. Employer Identification 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 January 18, 2011
par value $0.10 per share		510,053,016

 

 

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 — December 31, 2010 and March 31, 2010			2
Condensed Consolidated Statements of Operations — Three and Nine Months Ended December 31, 2010 and 2009			3
Condensed Consolidated Statements of Cash Flows — Nine Months Ended December 31, 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			23
Overview			23
Quarterly Update			27
Performance Indicators			28
Results of Operations			31
Liquidity and Capital Resources			37
Critical Accounting Policies and Business Practices			43
Item 3. Quantitative and Qualitative Disclosures About Market Risk			43
Item 4. Controls and Procedures			43
PART II. Other Information			44
Item 1. Legal Proceedings			44
Item 1A. Risk Factors			44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			44
Item 3. Defaults Upon Senior Securities			44
Item 4. Removed and Reserved			44
Item 5. Other Information			44
Item 6. Exhibits			45
Signatures			46
EX-10.1
EX-10.2
EX-12.1
EX-15
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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 December 31, 2010, the related condensed consolidated statements of operations for the three-month and nine-month periods ended December 31, 2010 and 2009, and the related condensed consolidated statements of cash flows for the nine-month periods ended December 31, 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
January 26, 2011

Item 1.

CA, INC. AND SUBSIDIARIES

(unaudited)

(in millions, except share and per share amounts)

		December 31,				March 31,
		2010				2010
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	2,518			$	2,583
Marketable securities — current			59				—
Trade and installment accounts receivable, net			866				931
Deferred income taxes — current			194				360
Other current assets			159				116
TOTAL CURRENT ASSETS			3,796				3,990
Marketable securities — noncurrent			108				—
Installment accounts receivable, due after one year, net			—				46
Property and equipment, net of accumulated depreciation of $711 and $630, respectively			439				452
Goodwill			5,742				5,667
Capitalized software and other intangible assets, net			1,299				1,150
Deferred income taxes — noncurrent			309				355
Other noncurrent assets, net			198				178
TOTAL ASSETS		$	11,891			$	11,838
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current portion of long-term debt and loans payable		$	16			$	15
Accounts payable			81				81
Accrued salaries, wages and commissions			256				348
Accrued expenses and other current liabilities			358				425
Deferred revenue (billed or collected) — current			2,342				2,555
Taxes payable, other than income taxes payable — current			82				82
Federal, state and foreign income taxes payable — current			25				31
Deferred income taxes — current			53				51
TOTAL CURRENT LIABILITIES			3,213				3,588
Long-term debt, net of current portion			1,539				1,530
Federal, state and foreign income taxes payable — noncurrent			387				400
Deferred income taxes — noncurrent			143				134
Deferred revenue (billed or collected) — noncurrent			995				1,068
Other noncurrent liabilities			149				135
TOTAL LIABILITIES			6,426				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; 504,092,317 and 509,469,998 shares outstanding, respectively			59				59
Additional paid-in capital			3,598				3,657
Retained earnings			3,938				3,361
Accumulated other comprehensive loss			(79	)			(130	)
Treasury stock, at cost, 85,602,764 shares and 80,225,083 shares, respectively			(2,051	)			(1,964	)
TOTAL STOCKHOLDERS’ EQUITY			5,465				4,983
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	11,891			$	11,838

See accompanying Notes to the Condensed Consolidated Financial Statements.

CA, INC. AND SUBSIDIARIES

(unaudited)

(in millions, except per share amounts)

		For the Three								For the Nine
		Months Ended								Months Ended
		December 31,								December 31,
		2010				2009				2010				2009
REVENUE
Subscription and maintenance revenue		$	995			$	995			$	2,917			$	2,905
Professional services			88				73				245				213
Software fees and other			82				54				204				115
TOTAL REVENUE			1,165				1,122				3,366				3,233
EXPENSES
Costs of licensing and maintenance			82				73				233				211
Costs of professional services			77				66				223				191
Amortization of capitalized software costs			52				34				145				101
Selling and marketing			348				315				955				879
General and administrative			114				129				344				358
Product development and enhancements			110				117				363				348
Depreciation and amortization of other intangible assets			47				39				136				116
Other expenses (gains), net			5				(3	)			9				11
Restructuring and other			(8	)			2				(11	)			4
TOTAL EXPENSES BEFORE INTEREST AND INCOME TAXES			827				772				2,397				2,219
Income from continuing operations before interest and income taxes			338				350				969				1,014
Interest expense, net			10				23				35				62
Income from continuing operations before income taxes			328				327				934				952
Income tax expense			128				71				289				283
INCOME FROM CONTINUING OPERATIONS			200				256				645				669
Income (loss) from discontinued operations, net of income taxes			—				1				(6	)			1
NET INCOME		$	200			$	257			$	639			$	670
BASIC INCOME (LOSS) PER SHARE
Income from continuing operations		$	0.39			$	0.49			$	1.26			$	1.28
Loss from discontinued operations			—				—				(0.01	)			—
Net income		$	0.39			$	0.49			$	1.25			$	1.28
Basic weighted average shares used in computation			505				515				507				516
DILUTED INCOME (LOSS) PER SHARE
Income from continuing operations		$	0.39			$	0.49			$	1.25			$	1.27
Loss from discontinued operations			—				—				(0.01	)			—
Net income		$	0.39			$	0.49			$	1.24			$	1.27
Diluted weighted average shares used in computation			506				535				508				539

See accompanying Notes to the Condensed Consolidated Financial Statements.

CA, INC. AND SUBSIDIARIES

(unaudited)

(in millions)

		For the Nine Months
		Ended December 31,
		2010				2009
OPERATING ACTIVITIES:
Net income		$	639			$	670
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			281				220
Provision for deferred income taxes			187				52
Provision for bad debts			5				3
Share-based compensation expense			61				75
Amortization of discount on convertible debt			—				29
Asset impairments and other non-cash activities			—				3
Foreign currency transaction losses (gains)			3				(3	)
Changes in other operating assets and liabilities, net of effect of acquisitions:
Decrease in trade and current installment accounts receivable, net			112				13
Decrease in deferred revenue			(304	)			(266	)
(Decrease) increase in taxes payable, net			(82	)			14
Decrease in accounts payable, accrued expenses and other			(18	)			(39	)
Decrease in accrued salaries, wages and commissions			(56	)			(2	)
Decrease in restructuring liabilities			(56	)			(40	)
Changes in other operating assets and liabilities			(29	)			(5	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			743				724
INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired, and purchased software			(252	)			(203	)
Purchases of property and equipment			(73	)			(57	)
Cash proceeds from divestiture of assets			29				—
Capitalized software development costs			(116	)			(133	)
Purchases of marketable securities			(168	)			—
Other investing activities			(17	)			(3	)
NET CASH USED IN INVESTING ACTIVITIES			(597	)			(396	)
FINANCING ACTIVITIES:
Dividends paid			(61	)			(63	)
Purchases of common stock			(188	)			(90	)
Debt repayments			(9	)			(1,203	)
Debt borrowings			—				744
Debt issuance costs			—				(6	)
Proceeds from call spread option			—				55
Exercise of common stock options and other			7				6
NET CASH USED IN FINANCING ACTIVITIES			(251	)			(557	)
DECREASE IN CASH AND CASH EQUIVALENTS BEFORE EFFECT OF EXCHANGE RATE CHANGES ON CASH			(105	)			(229	)
Effect of exchange rate changes on cash			40				141
DECREASE IN CASH AND CASH EQUIVALENTS			(65	)			(88	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			2,583				2,712
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	2,518			$	2,624

See accompanying Notes to the Condensed Consolidated Financial Statements.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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 nine months ended December 31, 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 nine months ended December 31, 2010 and for the three and nine months ended December 31, 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 nine months ended December 31, 2010 and 2009. See Note N, “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 (gains), net” in the Company’s Condensed Consolidated Statements of Operations for the nine months ended December 31, 2010.

Cash Dividends:

The Company’s Board of Directors declared the following dividends during the nine months ended December 31, 2010 and 2009:

Declaration Date		Dividend Per Share				Record Date				Total Amount				Payment Date
										(in millions)
Nine Months Ended December 31, 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
December 2, 2010		$	0.04			December 13, 2010				$	20			December 22, 2010
Nine Months Ended December 31, 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
November 5, 2009		$	0.04			November 17, 2009				$	21			November 30, 2009

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

Cash and Cash Equivalents:

The Company’s cash and cash equivalents are held in numerous locations throughout the world, with approximately 52% being held outside the United States by the Company’s foreign subsidiaries at December 31, 2010.

Marketable Securities:

All marketable securities are classified as available-for-sale securities and are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of accumulated other comprehensive income until realized. Premiums and discounts on debt securities recorded at the date of purchase are recognized in “Interest expense, net” using the effective interest method. Realized gains and losses on sales of all such investments are reported in “Interest expense, net” and are computed using the specific identification cost method.

For marketable securities in an unrealized loss position, the Company is required to assess whether it intends to sell the security or will more likely than not be required to sell the security before the recovery of its amortized cost basis less any current-period credit loss. If either of these conditions is met, an other-than-temporary impairment on the security is recognized in “Interest expense, net” equal to the entire difference between its fair value and amortized cost basis. See Note E, “Marketable Securities” for additional information.

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 8.5 million shares of its common stock for approximately $170 million as of December 31, 2010.

Statements of Cash Flows:

For the nine months ended December 31, 2010 and 2009, interest payments were approximately $67 million and $60 million, respectively, and taxes paid were approximately $161 million and $197 million, respectively.

Non-cash financing activities for the nine months ended December 31, 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 $27 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 nine months ended December 31, 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.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

NOTE B — COMPREHENSIVE INCOME

Comprehensive income includes net income, unrealized gains on cash flow hedges, unrealized gains and losses on marketable securities and foreign currency translation adjustments. The components of comprehensive income for the three and nine months ended December 31, 2010 and 2009 are as follows:

		Three Months								Nine Months
		Ended December 31,								Ended December 31,
		2010				2009				2010				2009
		(in millions)
Net income		$	200			$	257			$	639			$	670
Net unrealized gain on cash flow hedges, net of tax			—				1				2				2
Unrealized gain/(loss) on marketable securities, net of tax(1)			—				—				—				—
Foreign currency translation adjustments			9				(3	)			49				70
Total comprehensive income		$	209			$	255			$	690			$	742

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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 nine months ended December 31, 2010 and 2009.

		Three								Nine
		Months Ended								Months Ended
		December 31,								December 31,
		2010				2009				2010				2009
		(in millions, except per share amounts)
Basic income from continuing operations per common share:
Income from continuing operations		$	200			$	256			$	645			$	669
Less: Income from continuing operations allocable to participating securities			(2	)			(3	)			(8	)			(7	)
Income from continuing operations allocable to common shares		$	198			$	253			$	637			$	662
Weighted-average common shares outstanding			505				515				507				516
Basic income from continuing operations per common share		$	0.39			$	0.49			$	1.26			$	1.28
Diluted income from continuing operations per common share:
Income from continuing operations		$	200			$	256			$	645			$	669
Add: Interest expense associated with Convertible Senior Notes, net of tax			—				7				—				22
Less: Income from continuing operations allocable to participating securities			(2	)			(3	)			(8	)			(7	)
Income from continuing operations allocable to common shares		$	198			$	260			$	637			$	684
Weighted average shares outstanding and common share equivalents
Weighted average common shares outstanding			505				515				507				516
Weighted average shares outstanding upon conversion of Convertible Senior Notes			—				18				—				21
Weighted average effect of share-based payment awards			1				2				1				2
Denominator in calculation of diluted income per share			506				535				508				539
Diluted income from continuing operations per common share		$	0.39			$	0.49			$	1.25			$	1.27

For the three months ended December 31, 2010 and 2009, respectively, approximately 5 million and 8 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
DECEMBER 31, 2010
(unaudited)

For the nine months ended December 31, 2010 and 2009, respectively, approximately 8 million and 12 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 both the three months and nine months ended December 31, 2010 and 2009 were considered participating securities in the allocation of net income available to common shareholders used in the computation of earnings per share.

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								Nine Months
		Ended December 31,								Ended December 31,
		2010				2009				2010				2009
		(in millions)
Costs of licensing and maintenance		$	1			$	—	(1)		$	3			$	2
Costs of professional services			1				1				3				2
Selling and marketing			8				8				23				25
General and administrative			7				7				17				29
Product development and enhancements			4				6				15				17
Share-based compensation expense before tax			21				22				61				75
Income tax benefit			(7	)			(8	)			(20	)			(26	)
Net share-based compensation expense		$	14			$	14			$	41			$	49

There were no capitalized share-based compensation costs for the three and nine months ended December 31, 2010 or 2009.

The following table summarizes information about unrecognized share-based compensation costs as of December 31, 2010:

						Weighted
		Unrecognized				Average Period
		Compensation				Expected to be
		Costs				Recognized
		(in millions)				(in years)
Stock option awards		$	4				2.5
Restricted stock units			13				2.1
Restricted stock awards			63				1.9
Performance share units			31				2.6
Total unrecognized share-based compensation costs		$	111				2.1

The value of performance share unit (PSU) awards is determined using 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 nine months ended December 31, 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
DECEMBER 31, 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 nine months ended December 31, 2010 and 2009:

		Three Months								Nine Months
		Ended December 31,								Ended December 31,
		2010				2009				2010				2009
		(shares in millions)
RSUs
Shares			—	(1)			—	(1)			0.6				0.6
Weighted Avg. Grant Date Fair Value (2)		$	21.69			$	22.58			$	21.30			$	17.52
RSAs
Shares			—	(1)			0.1				4.7				4.3
Weighted Avg. Grant Date Fair Value (3)		$	22.19			$	21.82			$	21.39			$	18.43

NOTE E — MARKETABLE SECURITIES

At December 31, 2010 available-for-sale securities consisted of the following:

		December 31, 2010
		(in millions)
		Aggregate				Gross				Gross
		Cost				Unrealized				Unrealized				Aggregate
		Basis				Gains				Losses				Fair Value
U.S. treasury and agency securities		$	24			$	—			$	—			$	24
Municipal securities			1				—				—				1
Corporate debt securities			142				—				—				142
Equity securities			1				—				(1	)			—
		$	168			$	—			$	(1	)		$	167

At December 31, 2010, the Company did not have any debt securities that were in a continuous unrealized loss position for greater than twelve months.

At March 31, 2010, the Company had less than $1 million of marketable securities.

At December 31, 2010, approximately $59 million of marketable securities had scheduled maturities of less than one year. At December 31, 2010, approximately $108 million of marketable securities have maturities of greater than one year, but do not exceed three years.

Proceeds from the sale of marketable securities, realized gains and realized losses were less than $1 million for the three and nine months ended December 31, 2010 and 2009.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

NOTE F — 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:

		December 31,				March 31,
		2010				2010
		(in millions)
Current:
Accounts receivable — billed		$	740			$	768
Accounts receivable — unbilled			83				72
Other receivables			20				26
Unbilled amounts due within the next 12 months — prior business model			47				93
Less: Allowance for doubtful accounts			(23	)			(24	)
Less: Unamortized discounts			(1	)			(4	)
Trade and installment accounts receivable, net		$	866			$	931
Noncurrent:
Unbilled amounts due beyond the next 12 months — prior business model		$	—			$	46
Installment accounts receivable, due after one year, net		$	—			$	46

NOTE G — GOODWILL, CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS

The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at December 31, 2010 were approximately $7,359 million and $6,060 million, respectively. These amounts include fully amortized intangible assets of approximately $5,274 million, composed of purchased software of approximately $4,656 million, internally developed software of approximately $498 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:

		At December 31, 2010
		Gross
		Amortizable				Accumulated				Net
		Assets				Amortization				Assets
		(in millions)
Purchased software products		$	772			$	179			$	593
Capitalized development cost and other intangibles:
Internally developed software products			649				187				462
Other identified intangible assets subject to amortization			650				420				230
Other identified intangible assets not subject to amortization			14				—				14
Total capitalized software and other intangible assets		$	2,085			$	786			$	1,299

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

Based on the capitalized software and other intangible assets recorded through December 31, 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		$	89			$	85			$	79			$	71			$	60
Internally developed			103				118				110				92				66
Other identified intangible assets subject to amortization			72				55				46				42				37
Total		$	264			$	258			$	235			$	205			$	163

For the nine months ended December 31, 2010, goodwill activity was as follows:

		Amounts
		(in millions)
Balance at March 31, 2010		$	5,667
Revisions to purchase price allocation of prior year acquisitions			(59	)
Balance at March 31, 2010 as revised		$	5,608
Amounts allocated to loss on discontinued operations			(11	)
Current year acquisitions			137
Foreign currency translation adjustment			8
Balance at December 31, 2010		$	5,742

NOTE H — 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.

Interest rate swaps: During the first nine months 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 December 31, 2010, the fair value of these derivatives was approximately $19 million, of which approximately $12 million is included in “Other current assets” and approximately $7 million is included in “Other noncurrent assets, net” in the Company’s Condensed Consolidated Balance Sheet. As of March 31, 2010, the fair value of these derivatives was approximately $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 were designated as cash flow hedges and matured in October 2010.

The effective portion of these cash flow hedges was recorded as “Accumulated other comprehensive loss” in the Company’s Condensed Consolidated Balance Sheets and was reclassified into “Interest expense, net,” in the Company’s Condensed Consolidated Statements of Operations in the same period during which the hedged transaction affected earnings. Any ineffective portion of the cash flow hedges would

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

have been recorded immediately to “Interest expense, net”; however, no ineffectiveness existed for the periods ended December 31, 2010 and 2009.

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 (gains), net” in the Company’s Condensed Consolidated Statements of Operations. As of December 31, 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 three months. The net fair value of these contracts at December 31, 2010 was approximately $2 million, of which approximately $8 million is included in “Other current assets” and approximately $6 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		December 31, 2010				December 31, 2009
Interest expense, net — interest rate swaps designated as cash flow hedges		$	1			$	2
Interest expense, net — interest rate swaps designated as fair value hedges		$	(3	)		$	—
Other expenses (gains), net — foreign currency contracts		$	1			$	—

		Amount of Net (Gain)/Loss Recognized in the
		Condensed Consolidated Statements of
		Operations
		(in millions)
		Nine Months Ended				Nine Months Ended
Location of Amounts Recognized		December 31, 2010				December 31, 2009
Interest expense, net — interest rate swaps designated as cash flow hedges		$	4			$	5
Interest expense, net — interest rate swaps designated as fair value hedges		$	(9	)		$	—
Other expenses (gains), net — foreign currency contracts		$	9			$	25

The amount of loss reclassified from “Accumulated other comprehensive income” into “Interest expense, net” in the Company’s Condensed Consolidated Statements of Operations was less than $1 million and approximately $4 million for the three and nine months ended December 31, 2010, respectively.

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 were in a net asset position at December 31, 2010 and therefore the Company posted no

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

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
DECEMBER 31, 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 December 31 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 December 31, 2010
Assets:
Money markets (3)		$	1,612			$	1,612			$	—
Marketable securities(4)			167				—				167
Foreign exchange derivatives not designated as hedges			8				—				8
Interest rate derivatives designated as fair value hedges(5)			19				—				19
Total Assets		$	1,806			$	1,612			$	194
Liabilities:
Foreign exchange derivatives not designated as hedges		$	6			$	—			$	6
Total Liabilities		$	6			$	—			$	6
At March 31, 2010
Assets:
Money markets(6)		$	1,805			$	1,805			$	—
Interest rate derivatives designated as fair value hedges(5)			1				—				1
Total Assets		$	1,806			$	1,805			$	1
Liabilities:
Interest rate derivatives designated as cash flow hedges		$	4			$	—			$	4
Total Liabilities		$	4			$	—			$	4

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

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

		At December 31, 2010
		(in millions)
		Carrying Value				Estimated Fair Value
Liabilities:
Total debt (1)		$	1,555			$	1,615
Facilities abandonment reserve (2)		$	54			$	59

The following table presents the carrying amounts and estimated fair values of the Company’s financial 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 values 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 total debt, including current maturities, have been based on quoted market prices.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

NOTE I — 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 nine months ended December 31, 2010, restructuring activity under the Fiscal 2010 plan was as follows:

						Facilities
		Severance				Abandonment
		(in millions)
Accrued balance at March 31, 2010		$	46			$	2
Changes in estimate			(3	)			—
Payments			(34	)			—
Accretion and other			(1	)			—
Accrued balance at December 31, 2010		$	8			$	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 improve the Company’s expense structure. 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 nine months ended December 31, 2010, restructuring activity under the Fiscal 2007 Plan was as follows:

						Facilities
		Severance				Abandonment
		(in millions)
Accrued balance at March 31, 2010		$	8			$	60
Changes in estimate			1				1
Payments			(4	)			(14	)
Accretion and other			—				1
Accrued balance at December 31, 2010		$	5			$	48

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
DECEMBER 31, 2010
(unaudited)

NOTE J — INCOME TAXES

Income tax expense for the three and nine months ended December 31, 2010 was $128 million and $289 million, respectively, compared with the three and nine months ended December 31, 2009 of $71 million and $283 million, respectively.

For the three and nine months ended December 31, 2010, the Company recognized a net tax expense of approximately $26 million and a net tax benefit of approximately $10 million, respectively, resulting primarily from refinements of tax positions taken in prior periods, assertion of affirmative claims in the context of tax audits, the resolutions and accruals of uncertain tax positions relating to non-U.S. jurisdictions and the retroactive reinstatement in December 2010 of the research and development tax credit in the U.S. For the three and nine months ended December 31, 2009, the Company’s income tax provision included net benefits of approximately $23 million and $30 million, respectively, resulting from reconciliations of tax returns to tax provisions, the resolution of uncertain tax positions relating to non-U.S. jurisdictions and refinements of estimates ascribed to tax positions taken in prior periods relating to the Company’s international tax profile.

Additions and reductions to the liability for uncertain tax positions in the nine months ended December 31, 2010 were approximately $205 million and $61 million, respectively, which are primarily comprised of additions for uncertain tax positions related to the current and prior year, and reductions for prior year tax positions arising from settlement payments and statute of limitations expirations.

The Company’s effective tax rate, excluding the impact of discrete items, for the nine months ended December 31, 2010 and December 31, 2009 was 32.0% and 31.9%, respectively. Changes in the anticipated 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 the Company’s operations or financial position. However, the impact of such items may yield additional tax expense in the fourth quarter of fiscal year 2011 and future periods and the Company is anticipating a fiscal year 2011 effective tax rate of approximately 32% to 33%.

NOTE K — 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), which were consolidated in November 2004 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 sought relief against certain current or former employees and/or directors and outside auditors of the Company based on a variety of claims. The Company was named as a nominal defendant.

On February 1, 2005, the Company established a Special Litigation Committee of members of its Board of Directors who were independent of the defendants to, among other things, control and determine the Company’s response to the Derivative Action. The Special Litigation Committee and the Company served motions seeking to dismiss and realign the claims and parties in accordance with the Special Litigation Committee’s recommendations. By an Order dated September 29, 2010, the Federal Court granted the Company’s motion in all respects, granting relief including the following: (1) dismissing the claims against current and former Company directors Kenneth Cron, Alfonse D’Amato, William de Vogel, Gary Fernandes, Richard Grasso, Robert E. La Blanc, Jay W. Lorsch, Roel Pieper, Lewis Ranieri and Walter P. Schuetze and Ernst & Young LLP, KPMG LLP and Michael A. McElroy; and (2) realigning the Company as plaintiff with respect to certain of the claims against Charles Wang, Peter Schwartz, Russell Artzt, David Kaplan, Sanjay Kumar, Charles McWade, Stephen Richards, David Rivard, Lloyd Silverstein, Steven Woghin and Ira Zar (the realigned defendants). The Company has

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

settled with all realigned defendants other than Messrs. Wang and Schwartz against whom an amended complaint was filed on December 23, 2010 seeking compensatory and punitive damages for (1) breach of fiduciary duty; (2) restitution and unjust enrichment; (3) fraud; and (4) other related actions.

During the three months ended December 31, 2010, the Company received approximately $10 million in connection with one-time litigation settlements associated with the above derivative litigation. The settlements received were recorded in the “Restructuring and other” line of the Condensed Consolidated Statements of Operations.

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 the plaintiffs’ claims and seek a declaratory judgment that the Company does not infringe the patent-in-suit and that the patent is invalid. The parties are engaged in discovery. During discovery, plaintiffs identified the Company’s ERwin Data Modeler, Gen and Plex products as allegedly infringing the patent-in-suit. 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.

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. In November 2010, the Company filed an answer that, among other things, disputes the plaintiffs’ claims and seeks 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.

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.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

NOTE L — DEFERRED REVENUE

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

		December 31,				March 31,
		2010				2010
		(in millions)
Current:
Subscription and maintenance		$	2,195			$	2,389
Professional services			139				151
Financing obligations and other			8				15
Total deferred revenue (billed or collected) — current			2,342				2,555
Noncurrent:
Subscription and maintenance			968				1,042
Professional services			24				24
Financing obligations and other			3				2
Total deferred revenue (billed or collected) — noncurrent			995				1,068
Total deferred revenue (billed or collected)		$	3,337			$	3,623

NOTE M — ACQUISITIONS

During the third quarter of fiscal year 2011, the Company acquired 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 purchase price of the acquisition was approximately $197 million.

The total purchase price was allocated to net tangible and intangible assets and liabilities based upon their estimated fair values as of October 4, 2010. The allocation of purchase price to acquired identifiable assets, including intangible assets, is preliminary because the Company has not completed its analysis of the fair value report of the acquired intangibles and the historical tax records of Arcot. The excess purchase price over the estimated value of the net tangible and identifiable intangible assets was recorded as goodwill. Goodwill recognized in the preliminary purchase price allocation includes synergies expected to be achieved through integration of the acquired technology with the Company’s existing product portfolio.

The Company’s other acquisitions during the first nine months of fiscal year 2011 were individually immaterial and had an aggregate purchase price of approximately $74 million.

The pro forma effects of the Company’s fiscal year 2011 acquisitions on revenues and results of operations for fiscal years 2011 and 2010 were considered immaterial. The fiscal year 2011 acquisitions’ effects on revenue and results of operations since the dates of acquisition were considered immaterial.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

The following represents the preliminary allocation of the purchase price and estimated useful lives to the acquired net assets of Arcot and the Company’s other fiscal year 2011 acquisitions:

						Other Fiscal 2011				Estimated
(dollars in millions)		Arcot				Acquisitions				Useful Life
Finite-lived intangible assets(1)		$	38			$	12			5-8 years
Purchased software			86				42			10 years
Goodwill			108				29			Indefinite
Deferred tax liabilities			(46	)			(13	)		—
Other assets net of other liabilities assumed			11				4			—
Purchase Price		$	197			$	74

Most of the goodwill is not expected to be deductible for tax purposes.

The following represents the 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 fourth quarter of fiscal year 2011. Any revisions are not expected to be material. The purchase price allocation as of December 31, 2010 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			136			Indefinite
Deferred taxes, net liabilities			(30	)		—
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 $78 million and $74 million of accrued acquisition-related liabilities as of December 31, 2010 and March 31, 2010, respectively. Approximately $73 million and $64 million of the accrued acquisition related costs at December 31, 2010 and March 31, 2010, respectively, related to purchase price amounts withheld subject to indemnification protections.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
(unaudited)

NOTE N — 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 nine months ended December 31, 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 tax expense of approximately $4 million.

The Information Governance business results for the three and nine months ended December 31, 2009 consisted of revenue of $6 million and $17 million, respectively, and income from operations of $1 million in both periods.

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 to 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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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, enabling 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 December 31, 2009 in an effort to expand our product portfolio, including Torokina Pty Ltd, Hyperformix, Inc., Arcot Systems, Inc., Nimsoft AS, 3Tera, Inc. and Oblicore, Inc.;
	•		Re-branded our company; and
	•		Realigned our operations with the intention of driving increased collaboration and accountability across the Company while enabling us to deliver even greater customer service and product innovation.

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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 the introduction of 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 the introduction of new products. We define freestanding sales 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 our growth geographies. Our Nimsoft acquisition also accelerates our ability to access both growth accounts and growth geographies through new channels, including managed service providers. In addition, we further enhanced our SaaS capabilities in growth accounts and growth geographies with our acquisition of Arcot Systems, Inc.

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. This helps us drive results from both the assets we have developed and those that we have acquired. Our acquisition of Torokina Pty Ltd enhances our ability to access these emerging trends within the communication service provider market to solve the unique performance management needs for both internal IT and network operations requirements within that market.

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 with 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.

Total revenue backlog at December 31, 2010 of $8,015 million increased 1% compared with the balance of $7,899 million at December 31, 2009. The current portion of revenue backlog represents revenue to be recognized within the next 12 months. The current portion of revenue backlog at December 31, 2010 of $3,592 million increased by 4% compared with the balance of $3,456 million at December 31, 2009. Generally, we believe that an increase in the current portion of revenue backlog is a positive indicator of future subscription and maintenance revenue growth.

Total bookings in the third quarter of fiscal 2011 declined 6% to $1,281 million compared with $1,367 million from the year-ago period, due primarily to a decrease in license and maintenance renewal bookings. This was partially offset by favorable results for total new product and capacity sales for the quarter, which grew in low single digits year over year. Within new product and capacity sales for the third quarter

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of fiscal 2011, the increase in new distributed products and mainframe capacity was partially offset by a decrease in new mainframe product sales. Generally, total new product and capacity sales consist of new sales of distributed products, mainframe products and capacity. Renewal bookings increased sequentially from the second quarter of fiscal 2011, which is consistent with our expectation that our renewal portfolio would increase in the second half of fiscal 2011. It is our expectation that this sequential growth will continue in the fourth quarter of fiscal 2011. As a result, we expect higher levels of bookings in the second half of fiscal 2011, compared with the first half of fiscal 2011.

Total revenue for the third quarter of fiscal 2011 was $1,165 million and grew 4%, compared with $1,122 million in the year-ago period, primarily due to growth in the U.S. revenue of $43 million or 7%. International revenue remained flat for the third quarter of fiscal 2011, compared with the third quarter of fiscal 2010. Lower revenue in Europe, Middle East and Africa (EMEA) was mostly offset by revenue growth in the Asia-Pacific-Japan (APJ) and Latin America (LA) regions. Excluding an unfavorable foreign exchange effect of $8 million, international revenue would have increased by $8 million or 2%. Our revenue growth was 2% from existing products and services and 2% from acquired technologies (which we define as technology acquired within the prior 12 months). Excluding the unfavorable foreign currency effect, our revenue growth was split 3% for existing products and services and 2% for acquired technologies. Revenue from software fees and other for the third quarter of fiscal 2011 increased by $28 million or 52% compared with the year-ago period, primarily due to revenue from the successful integration of service assurance technologies associated with one of our fiscal 2010 acquisitions into our existing product portfolio. Professional service revenues for the third quarter of fiscal 2011 increased by 21% compared with the year-ago period.

Total expense before interest and income taxes of $827 million grew 7%, compared with $772 million in the year-ago period. This increase includes a favorable foreign currency effect of $2 million. The increase was primarily the result of acquisitions during fiscal 2010, offset by a one-time $10 million benefit received from certain derivative litigation settlements. We may experience similar additional costs associated with any future acquisitions.

Income before interest and income taxes decreased $12 million, or 3% in the third quarter of fiscal 2011. Tax expense increased $57 million compared with the year-ago period, primarily as a result of nonrecurring discrete items. Diluted income from continuing operations per share for the third quarter of fiscal 2011 was $0.39, compared with $0.49 in the year-ago period, reflecting primarily an increase in income tax expenses offset in part by the Company’s repurchase of its common shares.

Cash flow from operations in the third quarter of fiscal 2011 was $496 million and grew 45%, compared with $342 million in the year-ago period. This growth reflects both a year-over-year increase of $78 million in up-front cash collections from single installment payments and an increase in collections on trade receivables of $122 million. This was partially offset by an increase in disbursements of $46 million, primarily attributable to acquisitions and personnel costs.

For the first nine months of fiscal 2011, cash flow from operations was $743 million and grew 3%, compared with $724 million in the year-ago period. This growth reflects both a year-over-year increase of $64 million in up-front cash collections from single installment payments and an increase in collections on trade receivables of $89 million. This was partially offset by an increase in disbursements of $134 million, primarily attributable to acquisitions and personnel costs.

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QUARTERLY UPDATE

	•		In October 2010, we announced the new release of CA 3Tera® AppLogic®, our new turnkey cloud computing platform. CA 3Tera AppLogic helps organizations increase business agility, reduce risks associated with cloud deployments and enter new markets more quickly than previously possible.
	•		In October 2010, we acquired 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 added technology for fraud prevention and authentication to our Identity and Access Management offerings.
	•		In October 2010, we announced a next-generation of our Automation Suite to help customers migrate to a virtualized, dynamic cloud computing infrastructure. The Suite is designed to offer a comprehensive business service-centric approach to the deployment and scaling of IT infrastructure and services.
	•		In October 2010, we acquired Hyperformix, Inc., a privately held provider of capacity management software for dynamic physical, virtual and cloud IT infrastructures.
	•		In December 2010, we announced the availability of CA Mainframe Chorus, an important innovation to our Technologies Mainframe 2.0 strategy. It offers management capabilities that are designed to appeal to the next generation mainframe staff while also offering significant productivity improvements to today’s mainframe experts.
	•		In December 2010, we acquired Torokina Pty Ltd (Torokina), an Australia-based provider of telecommunications management solutions to 2G, 3G, next generation networks and VoiP service providers and network operators worldwide. Prior to the acquisition, we worked with Torokina as a partner and independent vendor.

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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:

		Third Quarter
		Comparison
		Fiscal Year 2011 versus
		Fiscal Year 2010												Percent
		2011				2010(1)				Change				Change
		(dollars in millions)
Total revenue		$	1,165			$	1,122			$	43				4	%
Subscription and maintenance revenue		$	995			$	995			$	—				—	%
Net income		$	200			$	257			$	(57	)			(22	)%
Cash provided by operating activities		$	496			$	342			$	154				45	%
Total bookings		$	1,281			$	1,367			$	(86	)			(6	)%
Subscription and maintenance bookings		$	1,099			$	1,203			$	(104	)			(9	)%
Weighted average subscription and maintenance license agreement duration in years			3.20				3.23				(0.03	)			(1	)%
Annualized subscription and maintenance bookings		$	343			$	372			$	(29	)			(8	)%

		First Nine Months
		Comparison
		Fiscal Year 2011 versus
		Fiscal Year 2010												Percent
		2011				2010(1)				Change				Change
		(dollars in millions)
Total revenue		$	3,366			$	3,233			$	133				4	%
Subscription and maintenance revenue		$	2,917			$	2,905			$	12				—	%
Net income		$	639			$	670			$	(31	)			(5	)%
Cash provided by operating activities		$	743			$	724			$	19				3	%
Total bookings		$	3,049			$	3,493			$	(444	)			(13	)%
Subscription and maintenance bookings		$	2,601			$	3,133			$	(532	)			(17	)%
Weighted average subscription and maintenance license agreement duration in years			3.22				3.58				(0.36	)			(10	)%
Annualized subscription and maintenance bookings		$	808			$	875			$	(67	)			(8	)%

										Change								Change
		Dec. 31,				March 31,				From				Dec. 31,				From Prior
		2010				2010(1)				Year End				2009				Year Quarter
		(in millions)
Cash, cash equivalents and marketable securities(2)		$	2,685			$	2,583			$	102			$	2,624			$	61
Total debt		$	1,555			$	1,545			$	10			$	1,545			$	10
Total expected future cash collections from committed contracts(3)		$	5,544			$	5,555			$	(11	)		$	5,591			$	(47	)
Total revenue backlog(3)		$	8,015			$	8,193			$	(178	)		$	7,899			$	116