Quarterly Financial Trends
2006 Segment Information
| Services |
1Q
|
2Q
|
3Q
|
4Q
|
Total
|
| Customer Revenue |
$1,176.4 |
$1,224.5 |
$1,217.6 |
$1,298.7 |
$4,917.2 |
| Change vs. Prior Year |
6.2% |
-0.9% |
3.7% |
2.2% |
2.7% |
| Change vs. Prior Quarter |
-7.4% |
4.1% |
-0.6% |
6.7% |
NM |
| % of Total Revenue |
84.8% |
87.0% |
86.3% |
83.7% |
85.4% |
| Gross Profit Margin * |
15.2% |
14.3% |
13.9% |
16.9% |
15.1% |
| Operating Profit Margin * |
-0.9% |
-0.9% |
-1.3% |
1.2% |
-0.5% |
| Technology |
1Q
|
2Q
|
3Q
|
4Q
|
Total
|
| Customer Revenue |
$211.4 |
$182.8 |
$192.5 |
$253.3 |
$840.0 |
| Change vs. Prior Year |
-18.3% |
-8.4% |
-9.7% |
-15.2% |
-13.4% |
| Change vs. Prior Quarter |
-29.2% |
-13.5% |
5.3% |
31.6% |
NM |
| % of Total Revenue |
15.2% |
13.0% |
13.7% |
16.3% |
14.6% |
| Gross Profit Margin * |
41.9% |
37.6% |
46.3% |
49.0% |
44.2% |
| Operating Profit Margin * |
-5.4% |
-12.2% |
5.5% |
13.7% |
1.7% |
*Based on total segment revenue.
$ in Millions
The company has two business segments: Services and Technology. Revenue classifications by segment are as follows: Services – consulting and systems integration, outsourcing, infrastructure services and core maintenance; Technology – enterprise-class servers and specialized technologies. The accounting policies of each business segment are the same as those followed by the company as a whole. Intersegment sales and transfers are priced as if the sales or transfers were to third parties.
Accordingly, the Technology segment recognizes intersegment revenue and manufacturing profit on hardware and software shipments to customers under Services contracts. The Services segment, in turn, recognizes customer revenue and marketing profits on such shipments of company hardware and software to customers. The Services segment also includes the sale of hardware and software products sourced from third parties that are sold to customers through the company's Services channels. In the company's consolidated statements of income, the manufacturing costs of products sourced from the Technology segment and sold to Services customers are reported in cost of revenue for Services.
Also included in the Technology segment’s sales and operating profit are sales of hardware and software sold to the Services segment for internal use in Services agreements. The amount of such profit included in operating income of the Technology segment for the years ended December 31, 2006, 2005 and 2004, was $16.4 million, $16.1 million and $17.9 million, respectively. The profit on these transactions is eliminated in Corporate.
The company evaluates business segment performance on operating income exclusive of restructuring charges and unusual and nonrecurring items, which are included in Corporate. All other corporate and centrally incurred costs are allocated to the business segments based principally on revenue, employees, square footage or usage.
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