In this section, we discuss our results of operations on a segment basis. In previous fiscal years, we operated in four business segments in the technology industry: products, web application performance management services, professional services and application services. Effective April 1, 2011, we realigned our business unit structure which had the following effect on our segments: (1) the former products segment split into four new segments:
Application Performance Management ("APM"), Mainframe, Changepoint and Uniface;
(2) the former web performance services segment ("Gomez SaaS" solution) and APM on-premises software (formerly Vantage) are combined within the APM segment; and
(3) the operating results of our software related professional services ("software related services") are reported within APM, Mainframe, Changepoint and Uniface, as applicable (previously reported in the Professional Services segment).

As a result of these changes, we now have six business segments: APM, Mainframe ("MF"), Changepoint ("CP"), Uniface ("UF"), Professional Services ("PS") and Covisint Application Services ("AS" or "Covisint"). These segments are described in detail in note 1 to the consolidated financial statements.

This business unit structure is intended to provide better visibility and control over the operations of our business and to increase our market agility, enabling us to more effectively capitalize on market conditions and competitive advantages to maximize revenue growth and profitability. The segment presentation in the prior periods has been revised to conform to the current presentation of our reportable segments. The change in reporting segments had no impact on previously reported consolidated financial results.

We collectively refer to the solutions offered within our APM, Mainframe, Changepoint and Uniface segments as "software solutions". In order to provide a supplementary view of this business, aggregated financial data for our software solutions is presented herein.

We evaluate the performance of our segments based primarily on revenue growth and contribution margin which represents operating profit before certain charges such as internal information system support, finance, human resources, legal, administration and other corporate charges. References to years are to fiscal years ended March 31 unless otherwise specified. This discussion and analysis should be read in conjunction with the audited consolidated financial statements and notes included in Item 8 of this report.

FORWARD-LOOKING STATEMENTS

The following discussion contains certain forward-looking statements within the meaning of the federal securities laws. When we use words such as "may", "might", "will", "should", "believe", "expect", "anticipate", "estimate", "continue", "predict", "forecast", "projected", "intend" or similar expressions, or make statements regarding our future plans, objectives or expectations, we are making forward-looking statements. Numerous important factors, risks and uncertainties affect our operating results, including, without limitation, those discussed in Item 1A. Risk Factors and elsewhere in this report, could cause actual results to differ materially from the results implied by these or any other forward-looking statements made by us, or on our behalf. There can be no assurance that future results will meet expectations. While we believe that our forward-looking statements are reasonable, you should not place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as required by applicable law, we do not undertake any obligation to publicly release any revisions which may be made to any forward-looking statements to reflect events or circumstances occurring after the date of this report.

OVERVIEW

We deliver value to businesses by providing software solutions (both on-premises and SaaS models), professional services and application services that improve the performance of information technology organizations.

Our primary source of profitability and cash flow is the sale of our mainframe productivity tools ("mainframe") that are used within our customers' mainframe computing environments for fault diagnosis, file and data management, application performance monitoring and application debugging. Although mainframe license fees increased in fiscal 2012, we have experienced lower volumes of software license transactions for our mainframe solutions in preceding years causing an overall downward trend in our mainframe product revenues which we expect to continue. Changes in our current customer IT computing environments and spending habits have impacted their need for additional mainframe computing capacity. In addition, increased competition and pricing pressures have had a negative impact on our revenues. Customers utilize our products to reduce operating costs, increase programmer productivity and create a smooth transition to the next generation of mainframe environment programmers. We will continue to make strategic enhancements to our mainframe solutions through research and development investments with the goal of meeting customer needs and maintaining a maintenance renewal rate of approximately 90%. The cash flow generated from our mainframe business supports our growth segments.

We have identified the APM market as a key source of future revenue growth. Web, mobile and cloud applications and the complex distributed applications delivery chain supporting them have become increasingly critical to a company's brand awareness, revenue growth and overall market share. Because of this, the market for APM solutions is significant and growing rapidly. Our APM solutions are marketed under the brand names "Gomez" and "dynaTrace". These solutions provide our customers with on-premises software ("dynaTrace Enterprise" which includes our former Vantage products) and SaaS platform based web application performance services ("Gomez SaaS"). These solutions ensure the optimal performance of each customer's enterprise, web, streaming, mobile and cloud applications. We are investing in our APM solutions with the goal of providing solutions that are best-in-class within the APM market. Specifically, our investments include: (1) enhancements to our global web performance services network with specific focus on ease of use, time-to-value and data analytics in mobile application performance capabilities and in video streaming performance; (2) enhancements which combine our on-premises software and SaaS solution into a single platform that provides performance metrics for cloud, web and data center applications in a consolidated dashboard; and (3) the acquisition of dynaTrace in July 2011. The dynaTrace software solution enables companies to continuously track transactions and provides exact identification of performance problems, enhancing our APM software solutions.

We have also identified the secured collaboration services market, served by our Covisint application services, as a key source of revenue growth. Technology has allowed business communities, organizations and systems to globally connect and share vital information, applications and processes across their internal and extended enterprises. Our Covisint services, which are provided on a SaaS platform to customers primarily in the automotive and healthcare industries, create an environment that simplifies and secures this collaboration atmosphere. The need for these services is growing, particularly in the healthcare industry as hospitals, physicians and the United States government move towards establishing electronic patient health and medical records that will require secured computerized databases and environments for storing and sharing of information.

We also continue to enhance our Changepoint and Uniface solutions primarily through research and development expenditures.

Our Changepoint solution provides a single automated solution for professional services organizations to forecast and plan, as well as, manage resources, projects and client engagements. In addition, for project-centric organizations, Changepoint provides a cohesive and consolidated view of projects, investments, resources and applications to help manage the entire business portfolio.

Our Uniface solution is mature with over 25 years on the market. Uniface is a rapid application development environment for building, renewing and integrating the latest complex enterprise applications. Our strategy with the Uniface solution is to enhance the product with additional features making it more effective for enterprise applications and to expand the capabilities of the product to other technology applications.

The professional services reporting segment recently went through a business transformation and is now focused on achieving modest revenue growth and improved margins by delivering high quality solutions and resources to our customers that meet their needs from application development through project management. Our goal is to provide the expertise, best practices and agility needed to meet our customers' critical technology challenges. Areas of growth that we have identified are cloud and mobile application development services. Enhancing our competencies in these areas will provide an opportunity to continue growing the segment's revenue and operating margin.

During fiscal 2012, we have invested additional resources in supporting anticipated growth in our APM and application services markets. We expect margins to increase in the future.

In May 2009, we exited the Quality and Testing business by selling our Quality and DevPartner distributed product lines ("divested products") to Micro Focus International PLC ("Micro Focus").

Annual Update

The following occurred during fiscal 2012:

? Realigned our business segments into six reportable segments.

? Acquired dynaTrace for $255.8 million in cash, plus approximately $300,000 of direct acquisition costs (see note 2 of the consolidated financial statements included in this report for additional information). We borrowed $129.5 million on our credit facility to partially fund this acquisition, of which $45.0 million remains outstanding as of the end of fiscal 2012.

? Realized an increase of $80.8 million or 8.7% in revenue for fiscal 2012 as compared to fiscal 2011 due to a $26.1 million increase in software license fees, an $18.7 million increase in application services fees, a $17.0 million increase in professional services fees, a $10.7 million increase in subscription fees and an $8.3 million increase in maintenance fees.

? Experienced a decline in operating margin to 12.5% during fiscal 2012 compared to 16.2% during fiscal 2011. The decrease was primarily due to our continued investments in the APM and application services businesses (see "Business Segment Analysis" for additional information).

? Realized an increase in software solutions revenue of $53.5 million or 7.3% as compared to the prior year but experienced a decrease in contribution margin to 38.3% during fiscal 2012 as compared to 43.4% during fiscal 2011 primarily due to increased investments within our APM business.

? Realized an increase in professional services segment revenue of $8.7 million or 6.1% during fiscal 2012 as compared to the prior year. Contribution margin declined to 16.1% during fiscal 2012 from 16.7% during fiscal 2011 due to a revenue reserve on a government contract (see "Professional Services" for additional information).

? Realized an increase in Covisint segment revenue of $18.7 million or 34.0% during fiscal 2012 as compared to fiscal 2011. Contribution margin declined to 1.4% during fiscal 2012 from 7.3% during fiscal 2011 as a result of hiring additional personnel to prepare for anticipated growth in the market.

? Repurchased approximately 2.3 million shares of our common stock at an average price of $8.45 per share as part of our discretionary stock repurchase plan.

? Released 28 product updates designed to increase the productivity of the IT departments of our customers, including 12 within the APM business segment, 15 within the Mainframe business segment and 1 within the Uniface business segment.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain operational data from the consolidated statements of comprehensive income as a percentage of total revenues and the percentage change in such items compared to the prior period:

                                              Percentage of                 Period-to-Period
                                             Total Revenues                      Change
                                            Fiscal Year Ended             2011           2010
                                                March 31,                  to             to
                                      2012        2011        2010        2012           2011
REVENUE:
Software license fees                   21.9 %      21.0 %      21.8 %      13.4 %          0.1 %
Maintenance fees                        42.3        45.1        49.3         2.0           (4.6 )
Subscription fees                        7.8         7.3         1.9        15.8          301.8
Professional services fees              20.7        20.7        22.5         8.8           (4.3 )
Application services fees                7.3         5.9         4.5        34.0           36.0
Total revenues                         100.0       100.0       100.0         8.7            4.1

OPERATING EXPENSES:
Cost of software license fees            1.8         1.5         1.7        23.6           (7.9 )
Cost of maintenance fees                 3.8         3.5         3.8        17.3           (0.9 )
Cost of subscription fees                2.9         2.7         1.0        18.8          168.9
Cost of professional services           18.1        17.9        20.1        10.1           (7.3 )
Cost of application services             7.2         5.5         4.3        41.9           34.5
Technology development and support      10.4         9.8        10.2        16.2           (1.0 )
Sales and marketing                     27.1        26.2        24.9        12.2            9.6
Administrative and general              16.2        16.7        18.4         5.4           (5.6 )
Restructuring costs                                              0.9                     (100.0 )
Gain on sale of assets                                          (5.9 )                    100.0
Total operating expenses                87.5        83.8        79.4        13.4            9.9
Income from operations                  12.5        16.2        20.6       (15.7 )        (18.0 )
Other income, net                        0.2         0.5         2.9       (63.4 )        (82.7 )
Income before income tax provision      12.7        16.7        23.5       (17.1 )        (26.0 )
Income tax provision                     3.9         5.1         7.7       (15.7 )        (30.7 )
Net income                               8.8 %      11.6 %      15.8 %     (17.7 ) %      (23.7 ) %

BUSINESS SEGMENT ANALYSIS

The following table sets forth, for the periods indicated, certain business segment operational data. We evaluate the performance of our segments based primarily on operating profit before certain charges such as internal information system support, finance, human resources, legal, administration and other corporate charges ("unallocated expenses"). Financial information for our business segments was as follows (in thousands):

                                       Software Solutions                                                           Unallocated
Year Ended:       APM          MF (1)          CP             UF           Total          PS            AS         Expenses (2)         Total

March 31,
2012

Total
revenues       $ 270,443      $ 419,317     $  47,867      $  46,908     $ 784,535     $ 151,506     $  73,731     $           -     $ 1,009,772

Operating
expenses         317,621         99,310        45,027         21,740       483,698       127,178        72,717           199,538         883,131

Contribution
/ operating
margin         $ (47,178 )    $ 320,007     $   2,840      $  25,168     $ 300,837     $  24,328     $   1,014     $    (199,538 )   $   126,641

Operating
margin %           (17.4 %)        76.3 %         5.9 %         53.7 %        38.3 %        16.1 %         1.4 %             N/A            12.5 %

March 31,
2011

Total
revenues       $ 231,999      $ 413,332     $  39,423      $  46,307     $ 731,061     $ 142,844     $  55,025     $           -     $   928,930

Operating
expenses         246,212         99,659        47,514         20,149       413,534       118,937        51,011           195,134         778,616

Contribution
/ operating
margin         $ (14,213 )    $ 313,673     $  (8,091 )    $  26,158     $ 317,527     $  23,907     $   4,014     $    (195,134 )   $   150,314

Operating
margin %            (6.1 %)        75.9 %       (20.5 %)        56.5 %        43.4 %        16.7 %         7.3 %             N/A            16.2 %

March 31,
2010

Total
revenues       $ 153,973      $ 460,638     $  40,000      $  43,682     $ 698,293     $ 153,419     $  40,467     $           -     $   892,179

Operating
expenses         186,849        114,474        52,239         17,347     $ 370,909       138,068        37,923           161,880         708,780

Contribution
/ operating
margin         $ (32,876 )    $ 346,164     $ (12,239 )    $  26,335     $ 327,384     $  15,351     $   2,544     $    (161,880 )   $   183,399

Operating
margin %           (21.4 %)        75.1 %       (30.6 %)        60.3 %        46.9 %        10.0 %         6.3 %             N/A            20.6 %

(1) The Mainframe business unit for fiscal 2010 includes $13.6 million in revenue related to products that were divested during fiscal 2010. See note 3 of the consolidated financial statements included in this report for additional information.

(2) Unallocated expenses for fiscal 2010 includes a gain of $52.4 million related to the sale of our divested product line and restructuring expenses of $8.0 million. See notes 3 and 9 of the consolidated financial statements included in this report for additional information.

SOFTWARE SOLUTIONS AS A GROUP

Our software solutions are comprised of the following business segments: (1) Application Performance Management; (2) Mainframe; (3) Changepoint; and (4) Uniface.

Revenue associated with our software solutions consists of software license fees, maintenance fees, subscription fees and professional services fees (software related services). Software solutions revenues are presented in the table below (in thousands):

                                                                                Period-to-Period Change
                                           Year Ended March 31,                2011 to           2010 to
                                     2012          2011          2010           2012               2011
Software license fees              $ 220,885     $ 194,745     $ 194,504            13.4 %              0.1 %
Maintenance fees                     427,534       419,240       439,491             2.0               (4.6 )
Subscription fees                     78,438        67,718        16,852            15.8              301.8
Professional services fees            57,678        49,358        47,446            16.9                4.0
Total software solutions revenue   $ 784,535     $ 731,061     $ 698,293             7.3 %              4.7 %

Software license fees ("license fees") increased $26.1 million during fiscal 2012 as compared to fiscal 2011, which included a positive impact from foreign currency fluctuations of $4.3 million, and increased $241,000 during fiscal 2011 as compared to fiscal 2010, which included a positive impact of foreign currency fluctuations of $1.6 million. Fiscal 2010 also included $8.7 million of license fees from divested products (see note 3 for additional information). Excluding the impact from foreign currency fluctuations and divested product revenue, license fees increased $21.8 million for fiscal 2012 as compared to fiscal 2011 and increased $7.3 million for fiscal 2011 as compared to fiscal 2010. The increase for fiscal 2012 was due largely to an increase in Mainframe license fees and, to a lesser extent, increases in APM and Changepoint license fees. The increase for fiscal 2011 was due primarily to increased industry demand for our APM and Uniface solutions, but was partially offset by a decline in Mainframe license fees (see the discussion within "Software Solutions by Business Segment" for more details).

During fiscal 2012, fiscal 2011 and fiscal 2010, for software license transactions that were required to be recognized ratably, we deferred $15.8 million, $29.9 million and $55.6 million, respectively, of license fees relating to such transactions that closed during the period. We recognized as license fees $48.5 million, $61.2 million and $80.2 million of previously deferred license revenue during fiscal 2012, fiscal 2011 and fiscal 2010, respectively, relating to such transactions that closed and had been deferred prior to the beginning of the period.

Maintenance fees increased $8.3 million during fiscal 2012 as compared to fiscal 2011, which included a positive impact from foreign currency fluctuations of $9.9 million, and decreased $20.3 million during fiscal 2011 as compared to fiscal 2010, which included a positive impact from foreign currency fluctuations of $230,000. Fiscal 2010 also included $4.8 million of revenue from divested products (see note 3 for additional information). Excluding the impact from foreign currency fluctuations and divested product revenue, maintenance fees declined $1.6 million for fiscal 2012 as compared to fiscal 2011 and declined $15.3 million for fiscal 2011 as compared to fiscal 2010. The decreases were due to a decline in maintenance fees associated with our mainframe product lines. Although we continue to experience a high maintenance renewal rate with our current mainframe customers, the decline in mainframe license deals during prior years is impacting mainframe maintenance revenue as new or growth customers are not entirely replacing the maintenance revenue loss from the non-renewed or reduced capacity mainframe maintenance arrangements. The decline was partially offset by an increase in APM maintenance fees primarily due to sales growth in our APM product line during fiscal 2011 and fiscal 2012 including additional maintenance related to the dynaTrace acquisition.

Subscription fees increased $10.7 million during fiscal 2012 as compared to fiscal 2011 primarily as a result of new SaaS solution sales exceeding customer cancellations. Subscription fees increased $50.9 million during fiscal 2011 as compared to fiscal 2010 as fiscal 2010 included only five months of web performance services revenue. In November 2009, through the acquisition of Gomez, we began to offer web performance services on a subscription basis that are used to test and monitor web and mobile applications. See note 2 of the consolidated financial statements included in this report for historical pro forma financial results of Compuware and Gomez.

Professional services fees within our software solutions business segments increased $8.3 million during fiscal 2012 as compared to fiscal 2011 and increased $1.9 million during fiscal 2011 as compared to fiscal 2010. The improvement in professional services fees during fiscal 2012 and fiscal 2011 primarily occurred within our APM business unit due to increased implementation fees associated with new APM solution sales and increases in demand for our managed service offerings.

Software solutions revenue by geographic location is presented in the table below (in thousands):

                                           Year Ended March 31,
                                     2012          2011          2010
United States                      $ 423,522     $ 394,632     $ 366,596
Europe and Africa                    234,909       222,538       228,712
Other international operations       126,104       113,891       102,985
Total software solutions revenue   $ 784,535     $ 731,061     $ 698,293

SOFTWARE SOLUTIONS BY BUSINESS SEGMENT

Application Performance Management

The financial results of operations for our APM segment were as follows (in
thousands):

                                                                                  Period-to-Period Change
                                           Year Ended March 31,                  2011 to            2010 to
                                    2012           2011           2010             2012               2011
Revenue
Software license fees             $  85,462      $  77,823      $  59,030               9.8 %            31.8 %
Maintenance fees                     77,329         64,283         60,307              20.3               6.6
Subscription fees                    76,246         67,718         16,852              12.6             301.8
Professional services fees           31,406         22,175         17,784              41.6              24.7
Total revenue                       270,443        231,999        153,973              16.6              50.7

Operating expenses                  317,621        246,212        186,849              29.0              31.8

Contribution margin               $ (47,178 )    $ (14,213 )    $ (32,876 )          (231.9 )%           56.8 %

Contribution margin %                 (17.4 %)        (6.1 %)       (21.4 %)

APM segment revenue increased $38.4 million during fiscal 2012 as compared to fiscal 2011. The increase in software license fees during fiscal 2012 can be attributed to additional revenue related to the acquisition of dynaTrace (see note 2 of the consolidated financial statements included in this report for additional information), partially offset by the effects of integrating our on-premises and SaaS sales force and related changes in the sales strategy during 2012, which had a negative impact on license sales. The increase in maintenance fees for fiscal 2012 as compared to fiscal 2011 is primarily attributable to current year on-premises solution sales exceeding customer cancellations as we experienced a high renewal rate with existing customers and, to a lesser extent, positive impact of revenue from dynaTrace and foreign currency rate fluctuations. The increase in subscription fees for fiscal 2012 is primarily the result of new SaaS solution sales exceeding customer cancellations. The increase in professional services fees for fiscal 2012 primarily relates to delivering a small backlog of projects and an increase in demand for our managed service offerings which are marketed as Guardian Services, and to a lesser extent, additional revenue related to the acquisition of dynaTrace. . . .