GENERAL

The following discussion and analysis provides information management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of the Company. The discussion should be read in conjunction with the Company's consolidated financial statements and associated notes for the year ended April 3, 2009.

There are three primary objectives of this discussion:

1) Provide a narrative explanation of the consolidated financial statements, as presented through the eyes of management;

2) Enhance the disclosures in the consolidated financial statements and footnotes, providing context within which the consolidated financial statements should be analyzed; and

3) Provide information to assist the reader in ascertaining the predictive value of the reported financial results.

To achieve these objectives, the discussion is presented in the following sections:

Overview-includes a brief description of the business and how it earns revenue and generates cash, as well as a discussion of the economic and industry factors, key business drivers, key performance indicators, fiscal 2009 highlights, and fiscal 2010 commentary.

Results of Operations-discusses year-over-year changes to operating results for fiscal 2007 to 2009, describing the factors affecting revenue on a consolidated and reportable segment basis, including new contracts, acquisitions and currency impacts, and also by describing the factors affecting changes in the major cost and expense categories.

Financial Condition-discusses causes of changes in cash flows and describes the Company's liquidity and available capital resources.

Critical Accounting Estimates-discusses accounting policies that require critical judgments and estimates.

OVERVIEW

The Company's primary service offerings are IT and business process outsourcing, and IT and professional services. Outsourcing activities include operating all or a portion of a customer's technology infrastructure and applications, and business process outsourcing. IT and professional services include systems integration, consulting and other professional services and software systems sales and related services.

Under the Company's comprehensive growth strategy introduced in fiscal 2009, known as Project Accelerate, the Company targets the delivery of its services within three broad service lines: Business Solutions and Services (BS&S), Global Outsourcing Services (GOS) and North American Public Sector (NPS). NPS and GOS are each separate reportable segments, while BS&S consists of three reportable segments. The five segments are as follows:

1. North American Public Sector. The North American Public Sector segment operates principally within a regulatory environment subject to governmental contracting and accounting requirements, including Federal Acquisition Regulations, Cost Accounting Standards and audits by various U.S. federal agencies. The North American Public Sector operating segment represents a separate reportable segment.

2. Global Outsourcing Services. The Global Outsourcing Services segment provides large-scale outsourcing solutions offerings as well as midsize services delivery to customers globally. The Global Outsourcing Services operating segment represents a separate reportable segment.

3. Business Solutions and Services - Consulting. In the BS&S - Consulting segment, the Company provides industry specific consulting and systems integration services, business process outsourcing, and intellectual property (IP)-based software solutions. These service offerings and clientele overlap and the Company draws on multiple operating segments within BS&S - Consulting to serve clients. These operating segments have similar economic characteristics, products, services, customers and methods of operations and, as a result, are aggregated for segment reporting purposes.

4. Business Solutions and Services - Financial Services Sector. The BS&S - Financial Services Sector segment primarily provides IP-based software solutions and business process outsourcing services to financial services companies in domestic and international markets.

5. Business Solutions and Services - Other. The Company's remaining operating segments do not meet the quantitative thresholds for separate disclosure and do not meet the aggregation criteria as indicated in SFAS No. 131. As a result, these operating segments are reported as "other" as indicated by SFAS No. 131. Because each of these other operating segments are within the Company's BS&S service line, the Company has labeled this group of operating segments as BS&S - Other. The operating segments comprising BS&S - Other include the Company's non-GOS operations in Australia and Asia and the Company's India operations.

Lines of Business                 Reportable Segments
Business Solutions and Services   BS&S - Consulting
                                  BS&S - Financial Services Sector
                                  BS&S - Other
Global Outsourcing Services       Global Outsourcing Services
North American Public Sector      North American Public Sector

See Note 15 to the consolidated financial statements.

Economic and Industry Factors

The Company's results of operations are affected by economic conditions generally, including macroeconomic conditions. We are monitoring current macroeconomic and credit market conditions and levels of business confidence and their potential effect on our clients and on us. A severe and/or prolonged economic downturn could adversely affect our clients' financial condition and the levels of business activities in the industries and geographies in which we operate. This may reduce demand for our services or depress pricing of those services and have a material adverse effect on our new contract bookings and results of operations. Particularly in light of recent economic uncertainty, we continue to monitor our costs closely in order to respond to changing conditions and to manage any impact to our results of operations.

Our results of operations are also affected by levels of business activity and rates of change in the industries we serve, as well as by the pace of technological change and the type and level of technology spending by our clients. The ability to identify and capitalize on these market and technological changes early in their cycles is a key driver of our performance.

The BS&S segments and the GOS segment markets are affected by various economic and industry factors. The economic environment in the regions CSC serves will impact customers' decisions for discretionary spending on IT projects. CSC is in a highly competitive industry which exerts downward pressure on pricing and requires companies to continually seek ways to differentiate themselves through several factors, including service offerings and flexibility. Management monitors industry factors including relative market shares, growth rates, billing rates, staff utilization rates and margins as well as macroeconomic indicators such as interest rates, inflation rates and foreign currency rates.

Outsourcing contracts are typically long-term relationships. Long-term, complex outsourcing contracts, including their consulting components, require ongoing review of the terms and scope of work, in order to meet clients' evolving business needs and our performance expectations.

The North American Public Sector segment market is also highly competitive and has unique characteristics. All U.S. government contracts and subcontracts may be modified, curtailed or terminated at the convenience of the government if program requirements or budgetary constraints change. In the event that a contract is terminated for convenience, the Company generally is reimbursed for its allowable costs through the date of termination and is paid a proportionate amount of the stipulated profit or fee attributable to the work performed. Shifting priorities of the U.S. government can also impact the future of projects. Management monitors government priorities and industry factors through numerous industry and government publications and forecasts, legislative activity, budgeting and appropriation processes and by participating in industry professional associations.

Business Drivers

Revenue in all three lines of business is generated by providing services on a variety of contract types lasting from less than six months to 10 years or more. Factors affecting revenue include:

· the Company's ability to successfully bid on and win new contract awards,

· the ability to satisfy existing customers and obtain add-on business and win contract re-competes,

· the ability to compete on services offered, technical ability, experience and flexibility,

· the ability to successfully identify and integrate acquisitions and leverage them to generate new revenues, and

· currency fluctuations related to international operations.

Earnings are driven by the above revenue factors, in addition to the following:

· the ability to control costs, particularly labor costs, subcontractor expenses and overhead costs including healthcare, pension and general and administrative costs,

· the ability to anticipate headcount needs to avoid staff shortages or excesses,

· the ability to accurately estimate various factors incorporated in contract bids and proposals, and

· the ability to develop offshore capabilities and migrate compatible service offerings offshore.

Cash flows are impacted by the above earnings factors, in addition to other factors including the following:

· timely management of receivables and payables,

· investment opportunities available, particularly related to business acquisitions and dispositions and large outsourcing contracts, and

· the ability to efficiently manage capital including debt and equity instruments.

Key Performance Indicators

The Company manages and assesses the performance of its business through various means, with the primary financial measures including new contract wins, revenue growth, margins, cash flow and return on investment.

New contract wins-In addition to being a primary driver of future revenue, focusing on new contract wins also provides management an assessment of the Company's ability to compete. The total level of wins tends to fluctuate from year to year depending on the timing of new or re-competed contracts, as well as numerous external factors. CSC employs stringent financial and operational reviews and discipline in the new contract process to evaluate risks and generate appropriate margins and returns from new contracts.

Revenue growth-Year-over-year revenues tend to vary less than new contract wins, and reflect performance on both new and existing contracts. With a wide array of services offered, the Company is able to pursue additional work from existing customers. In addition, incremental increases in revenue will not necessarily result in linear increases in costs, particularly overhead and other indirect costs, thus potentially improving profit margins. Foreign currency fluctuations also impact revenue growth.

Margins-Margins reflect the Company's performance on contracts and ability to control costs. While the ratios of various cost elements as a percentage of revenue can shift as a result of changes in the mix of businesses with different cost profiles, a focus on maintaining and improving overall margins leads to improved efficiencies and profitability. Although the majority of the Company's costs are denominated in the same currency as revenues, increased use of offshore support also exposes CSC to additional margin fluctuations.

Cash flow-Over time the primary drivers of the Company's cash flow are earnings provided by the Company's operations and the use of capital to generate those earnings. Also contributing to short term cash flow results are movements in current asset and liability balances. The Company also regularly reviews the U.S. Generally Accepted Accounting Principles (GAAP) cash flow measurements of operating, investing and financing cash flows, as well as the non-GAAP measure free cash flow.

Return on investment (ROI)-ROI is an effective indicator combining a focus on margins with efficient and productive net asset utilization. A combination of strong margins (measuring how efficiently profit is generated from revenue) and investment base turnover (measuring how effectively revenue is generated from investors' capital) is required to generate sufficient returns on capital. Strong working capital management also serves to minimize investment capital and increase returns.

Readers should be cautioned that Days Sales Outstanding (DSO), free cash flow and ROI are non-GAAP measures, and the Company's definition of such measures may differ from other companies. Therefore, such measures may not be comparable to those of other companies. CSC believes these non-GAAP financial measures provide useful information to investors regarding the Company's financial condition and results of operations as they provide another measure of the Company's performance and ability to service its debt.

CSC calculates DSO as follows: Total accounts receivable at fiscal period end divided by revenue per day. Total accounts receivables excludes tax receivables. Revenue per day is calculated based on fiscal days in the most recent quarter.

Free cash flow is equal to the sum of (1) operating cash flows, (2) investing cash flows, excluding business acquisitions and dispositions, purchase or sale of available for sale securities, and (3) capital lease payments.

ROI is calculated by multiplying profit before interest expense, special items, and after tax expense by the investment base turnover. Investment base turnover equals revenues divided by average debt and equity for the period. The Company's management uses ROI, DSO and free cash flow to evaluate investment returns and cash flow performance and are some of the measures used to assess management performance.

Fiscal 2009 Highlights

In fiscal 2009's difficult economic environment, the Company delivered improved revenue, pre-tax profit, net income, earnings per share and cash flow from operations. Margins improved due to continued focus on productivity and cost management. During fiscal 2008, the Company repurchased approximately 24.3 million shares of its common stock, also contributing to improved earnings per share due to the consequent share base reduction for fiscal 2009, despite associated financing costs.

Significant events during fiscal 2009 include:

· Revenues improved $240.4 million or 1.5%, while increasing 4.3% on a constant currency basis.

· Net income increased 104% to $1.11 billion, reflecting significant tax benefits from resolutions and adjustments in the U.S. federal and state, as well as international tax jurisdictions.

· Earnings per share were up 128% on a diluted basis.

· The Company announced contract awards of $16.2 billion including new NPS segment awards of $7.3 billion, BS&S segments awards of $4.4 billion, and GOS segment awards of $4.5 billion.

· Free cash flow of $1,020.6 million increased $845.4 million from fiscal 2008, driven by improved operating cash flows and lower capital expenditures.(1)

· DSO was 84 days at April 3, 2009, versus 90 days at March 28, 2008.

· Debt-to-total capitalization ratio was 43.5% at year-end, an increase of 4.6% from 38.9% in fiscal 2008 ratio.

· ROI was 14.9% for the year, up from 9.2% in fiscal 2008, driven significantly by fiscal 2009 tax benefits.

(1) The following is a reconciliation of free cash flow to the most directly comparable U.S. GAAP financial measure:

                                                                      Fiscal Year Ended
                                                                                              March 30,
(In millions)                                         April 3, 2009       March 28, 2008         2007
Free cash flow                                       $       1,020.6     $          175.2     $    671.5
Net cash used in investing activities                        1,038.0              2,718.7          872.7
Proceeds from redemption of investment in
preferred stock                                                                                    126.5
Acquisitions, net of cash acquired                            (100.3 )           (1,591.1 )       (134.3 )
Business dispositions                                                                                2.8
Capital lease payments                                          28.1                 40.1           39.4
Net cash provided by operating activities            $       1,986.4     $        1,342.9     $  1,578.6
Net cash used in investing activities                $      (1,038.0 )   $       (2,718.7 )   $   (872.7 )
Net cash provided by/(used in) financing
activities                                           $         742.1     $          997.9     $   (955.5 )

The Company's significant wins and scope extensions during fiscal 2009 included the following:

Global Outsourcing Services:

· Bombardier ($944 million),

· Zurich Omni ($399 million),

· TDC Applications ($413 million),

· Exelon ($150 million).

North American Public Sector:

· U.S. Air and Missile Contracts ($341 million),

· U.S. Army ($1.5 billion),

· U.S. Navy and NAVSEA ($570 million),

· State of North Carolina ($265 million),

· eMED New York ($322 million), and

· Department of Health Services (DHS) ($475 million).

The Company changed its methodology for determining the announced value for certain awards. NPS-announced values for ID/IQ awards represent the expected contract value at the time a task order is awarded under the contract. The bookings value of GOS-announced awards are estimated at the time of contract signing based on then existing projections of service volumes and currency exchange rates and include optional contract years. The announced values for BS&S line of business awards are based on firm commitments.

The Company has developed a broad, long-term revenue base which includes customers spread across multiple industries and geographic regions as well as service lines. A significant amount of CSC's revenues is derived from long-term contracts including information technology outsourcing, build and maintain engagements and U.S. federal government engagements. This provides the Company with a base of revenue during periods when contract awards may slow or the market for certain services softens.

Cash and cash equivalents at April 3, 2009, was nearly $2.3 billion, up from approximately $700 million in fiscal 2008, a $1.6 billion increase compared to a $350 million decrease from fiscal 2007 to 2008. The fiscal 2009 increase reflected increased cash flows from operating activities and lower uses of cash in investing activities. The higher operating cash flow was primarily attributable to higher net income, with significant non-cash tax benefits to net income offset by other improvements in working capital. The lower investing cash flows were primarily due to fiscal 2009 expenditures for acquisitions of $100 million, versus $1.6 billion for fiscal 2008. Cash provided from financing activities during fiscal 2009 reflect the Company's draw down of a credit facility, offset by principal payments on the long-term debt and commercial paper.

Free cash flow for fiscal 2009 was $1.0 billion, compared to $175 million for fiscal 2008. The comparison reflects the fiscal 2009 improvement in operating cash flows as well as lower capital expenditures for property, plant and equipment. The fiscal 2008 results also include significant restructuring outflows and the adverse impact of several timing matters with fiscal 2007, primarily fiscal 2007 capital expenditures paid for in fiscal 2008 and a large prepayment received at the end of fiscal 2007.

Fiscal 2010 Commentary

Although management believes CSC's broad service portfolio positions it well to assist public and private sector clients in the ongoing challenging macroeconomic environment, the Company expects continued overall pressure on revenue growth during fiscal 2010. Management will continue to focus on cost control and cash flow.

As a leading federal contractor and one of the top IT service providers to the U.S. federal government, CSC's NPS segment is well-positioned to benefit from the demand for IT services in this market. CSC sees opportunities for significant growth in the areas of health information and services, and cyber security, both of which are priority areas for funding. CSC anticipates continued strong funding levels in the Department of Defense, especially in the logistical support and training segments of the budget, and in the Department of Homeland Security for infrastructure modernization. Overall, NPS revenue is expected to grow at or above the fiscal 2009 level, benefiting from the $7.3 billion in bookings in fiscal 2009. While the ultimate distribution of U.S. federal funds and project assignments can vary, the Company expects broad IT and outsourcing capabilities to be viewed favorably by the U.S. federal government.

The Company expects the global commercial market to remain challenging during fiscal 2010, due to the current global economic environment. CSC has a base of significant outsourcing contracts, which the Company expects will continue to provide a stable revenue stream during fiscal 2010 in its GOS segment. However, growth from this revenue stream is expected to be tempered by the continued demand for offshore services and the resulting pressure on prices, as well as volatility in the short term projects. Demand for services in the BS&S segments is also expected to suffer due to the global economic situation. During fiscal 2009, the Company's GOS and BS&S revenue was negatively impacted by currency fluctuations. While exchange rates have stabilized recently, currency movements continue to be a major influence on results and the Company is unable to predict such changes.

With limited opportunities for revenue growth expected, management intends to increase its focus on operating income margin in fiscal 2010. Management of SG&A and other overhead costs, as well as continuing utilization of offshore and nearshore cost centers, is expected to mitigate margin pressure from lower revenue. The Company also will continue its focus on cash management, though fiscal 2010 free cash flow is not expected to match that of fiscal 2009. The fiscal 2009 achievement benefited from a six day improvement in DSO which is not anticipated to recur in fiscal 2010. Also, the company anticipates the relatively low capital expenditures made in fiscal 2009 will not be maintained in fiscal 2010. Fiscal 2009 free cash flow also benefited from realized gains on foreign currency hedging programs. Such gains or losses are dependent on the movement of foreign currency exchange rates which the Company is unable to predict. However, the Company continues to target free cash flow to approximate 90% of net income.

RESULTS OF OPERATIONS

Revenues

Revenues for the North American Public Sector, Global Outsourcing Services, and Business Solutions and Services segments (see Note 15 to the consolidated financial statements) for fiscal 2009, fiscal 2008 and fiscal 2007 are as follows:

                                         Fiscal 2009                      Fiscal 2008                Fiscal 2007
                                                  Percent
      Dollars in millions           Amount         Change         Amount        Percent Change         Amount
BS&S - Consulting                 $  2,034.3           11.1 %   $  1,831.5                 16.1 %   $     1,577.1
BS&S - Financial Services              990.8           (2.6 )      1,017.3                  4.4             974.1
   BS&S - Other                      1,384.6           12.9        1,225.9                 79.8             681.7
Business Solutions and Services      4,409.7            8.2        4,074.7                 26.0           3,232.9

Global Outsourcing Services          6,458.5           (4.4 )      6,756.0                  6.7           6,333.5

North American Public Sector         5,977.4            3.4        5,781.1                  6.1           5,446.5

Corporate                               17.4                          17.6                                   35.8
Subtotal                            16,863.0            1.4       16,629.4                 10.5          15,048.7
Eliminations                          (123.1 )                      (129.9 )                               (193.8 )
Total Revenue                     $ 16,739.9            1.5     $ 16,499.5                 11.1     $    14,854.9

The major factors affecting the percent change in revenues are presented as follows:

                                                               Approximate Impact
                                                                  of Currency            Net Internal
      Fiscal 2009 vs. Fiscal 2008           Acquisitions          Fluctuations              Growth           Total
BS&S - Consulting                                     8.1 %                   (5.7 )%              8.7 %        11.1 %
BS&S - Financial Services Sector                                              (1.2 )              (1.4 )        (2.6 )
BS&S - Other                                         10.7                     (3.0 )               5.2          12.9
Business Solutions and Services                       6.9                     (3.7 )               5.0           8.2
Global Outsourcing Services                            .7                     (4.6 )               (.5 )        (4.4 )
North American Public Sector                                                                       3.4           3.4
Total Revenue                                         2.0                     (2.8 )               2.3           1.5




                                                               Approximate Impact
                                                                  of Currency           Net Internal
      Fiscal 2008 vs. Fiscal 2007           Acquisitions          Fluctuations             Growth           Total
BS&S - Consulting                                     2.3 %                    6.9 %              6.9 %        16.1 %
BS&S - Financial Services Sector                                               1.4                3.0           4.4
BS&S - Other                                         56.6                     12.4               10.8          79.8
Business Solutions and Services                      13.1                      6.5                6.4          26.0
. . .