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Segment Information
 3 Months Ended
Mar. 31, 2015
Segment Information

e. Segment Information. Effective January 1, 2015, the company changed the grouping of certain of its classes of products and services. As a result, certain revenue (principally company technology products) previously reported in the company’s Services segment is now reported in its Technology segment. As a result, prior-periods segment revenue and cost of sales, as well as customer revenue by classes of similar products and services, have been reclassified to conform to the current-year period.

The company has two business segments: Services and Technology. Revenue classifications within the Services segment are as follows:

 

  •   Cloud & infrastructure services. This represents revenue from work the company performs in the data center and cloud area, technology consulting and technology-based systems integration projects, as well as global service desks and global field services.

 

  •   Application services. This represents revenue from application managed services and application development, maintenance and support work.

 

  •   Business processing outsourcing services. This represents revenue from the management of clients’ specific business processes.

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 engagements. The amount of such profit included in operating income of the Technology segment for the three months ended March 31, 2015 and 2014 was $1.5 million and $.4 million, respectively. The profit on these transactions is eliminated in Corporate.

 

The company evaluates business segment performance based on operating income exclusive of pension income or expense, 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.

A summary of the company’s operations by business segment for the three-month periods ended March 31, 2015 and 2014 is presented below (in millions of dollars):

 

     Total      Corporate      Services      Technology  

Three Months Ended March 31, 2015

                            

Customer revenue

    $ 721.2          $ 639.0       $ 82.2   

Intersegment

       $ (6.7 )       —           6.7   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total revenue

 $ 721.2    $ (6.7 )  $ 639.0    $ 88.9   
  

 

 

     

 

 

     

 

 

     

 

 

  

Operating income (loss)

 $ (30.0 )  $ (26.1 )  $ (8.5 )  $ 4.6   
  

 

 

     

 

 

     

 

 

     

 

 

  

Three Months Ended March 31, 2014

                            

Customer revenue

    $ 761.7          $ 681.7       $ 80.0   

Intersegment

       $ (6.1 )       .2         5.9   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total revenue

 $ 761.7    $ (6.1 )  $ 681.9    $ 85.9   
  

 

 

     

 

 

     

 

 

     

 

 

  

Operating income (loss)

 $ (19.9 )  $ (16.2 )  $ 10.4    $ (14.1 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Presented below is a reconciliation of total business segment operating loss to consolidated loss before income taxes (in millions of dollars):

 

     Three Months Ended March 31  
     2015      2014  

Total segment operating loss

    $ (3.9 )     $ (3.7 ) 

Interest expense

      (2.6 )       (2.0 ) 

Other income (expense), net

      4.9         (9.8 ) 

Corporate and eliminations

      (26.1 )       (16.2 ) 
  

 

 

     

 

 

  

Total loss before income taxes

 $ (27.7 )  $ (31.7 ) 
  

 

 

     

 

 

  

Customer revenue by classes of similar products or services, by segment, is presented below (in millions of dollars):

 

     Three Months Ended March 31  
     2015      2014  

Services

      

Cloud & infrastructure services

    $ 378.5       $ 419.4   

Application services

      202.4         196.2   

Business processing outsourcing services

      58.1         66.1   
  

 

 

     

 

 

  
  639.0      681.7   

Technology

   82.2      80.0   
  

 

 

     

 

 

  

Total

 $ 721.2    $ 761.7   
  

 

 

     

 

 

  

 

Geographic information about the company’s revenue, which is principally based on location of the selling organization, is presented below (in millions of dollars):

 

     Three Months Ended March 31  
     2015      2014  

United States

    $ 342.0       $ 311.3   

United Kingdom

      87.9         96.3   

Other foreign

      291.3         354.1   
  

 

 

     

 

 

  

Total

 $ 721.2    $ 761.7