BMC to Restructure After Earnings Warning

Buckling a bit under delays in customer purchasing, management software
maker BMC Software Monday said it would restructure after
warning in preliminary financial results for the first quarter that revenues
will be as much as $15 million less than previously expected.


The Houston vendor, which competes with Computer Associates
and Veritas , said it anticipates total revenues to be between $305 million to $312 million compared to estimated range of $320 million to $335 million the
company provided in April.


Earnings per share for the first quarter are estimated to be in the range of
one penny to 4 cents per common share, compared to the earnings per share of
5 to 10 cents the company had expected. License revenues are estimated to be
in the $105 million to $110 million range.


Blaming the delayed purchases on the uncertainty that comes hand in hand
with the current lagging economic climate, President and CEO Robert
Beauchamp said BMC completed 16 license transactions worth more than $1
million each in the first quarter of fiscal 2004, compared to 25 license
transactions in excess of $1 million in the same quarter of last year. The company posted no deals over $5 million.


“During the quarter our pipeline supported our estimated range,” Beauchamp
said in a conference call. “However, we experienced an unexpected increase
in the number of transactions that slipped at the end of the quarter. As a
result our closure rates declined significantly compared to either the
fourth quarter or the first quarter of last year. There were over $50
million in license transactions that slipped at the end of the quarter.
We’re actively working with our customers on the majority of these
transactions.”


Beauchamp said the company was very disappointed with the results from the
sales teams in North America and Germany, and pledged to lay off personnel
in those divisions who did not meet their quotas. He also promised BMC
would pump up investments in successful areas, such as its purchase
of Remedy earlier this year.


To reduce costs and boost profitability, BMC may also shed additional
product lines, akin to its recent divestitures of its enterprise propagation
products and most recent sale of BMC Patrol Storage Manager line to EMC.


Beauchamp said the company’s financial position is strong, with over $1
billion of cash and securities by the quarter’s end, and marketable cash
flow from operations estimated to be more than $100 million.


BMC Software will issue final results July 28.

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