BMC Posts First Quarter Profit

Despite declining revenue compared with last year, BMC posted a net income increase of $5.2 million.

Despite declining revenue compared with last year, BMC Software Inc. posted a net income increase of $5.2 million for its first fiscal quarter of 2003, compared with a net loss of $34.5 million in the same quarter a year ago.

The Houston-based management software provider posted revenues of $305.2 million in the quarter ended June 30, compared with revenues of $341 million for the same quarter a year earlier.

"Were pleased we executed well in a tough IT spending environment. Our licensed bookings were up 1.5 percent vs. one year ago. We sold more software than last year, the first time weve achieved that in 10 quarters," said Bob Beauchamp, BMCs president and CEO.

Due to special charges relating to merger compensation and a write-down on bonds, BMC posted earnings per share of 2 cents. Without those charges, it would have met Thompson First Call consensus estimates of 8 cents a share in earnings for the quarter.

BMC, like other software providers, is moving to record revenues over the life of a contract, deferring recognition of revenue over the length of the contract. The shift is a reflection of more flexible contract terms, subscription-based pricing and a desire to bring greater predictability to BMCs financial results.

BMC, unlike many other public companies reporting in recent weeks, has no outstanding debt. At the same time, it has generated up to $1.25 billion in cash with the first quarter. That allowed BMCs board of directors to free another $500 million for BMCs stock repurchase program.

Like other IT companies, significant deals that were expected to close at the quarter were delayed--primarily in Europe.

BMCs revenues were split fairly evenly across its two primary business units, with Enterprise Data Management making up 46 percent and Enterprise Systems Management making up 44 percent. BMCs business unit focused on five high potential growth areas--including Linux, storage management and security management--making up 10 percent of the quarters revenues.

Beauchamp said BMC fared well against both large competitors and niche players during the quarter. "Our win rates remain high against large competitors--over 80 percent--and our win rate against niche vendors was almost 60 percent," he said. BMCs most significant competitor is IBM, although its Tivoli unit "is not a competitive concern," he said. BMC signed new deals during the quarter with the U.S. Postal Service, Whirlpool Corp., CGI Group Inc., Continental Airlines and Nokia among others.

Disappointing among BMC software lines was its flagship Patrol family, which was hurt by "dismal" results for Unix servers, Beauchamp said. BMC has seen some resurgence in mainframe capacity and has seen some customers planning to increase their mainframe MIPs.

For the second fiscal quarter, BMC expects to see earnings per share in the range of 2 to 6 cents, and it expects revenues to be flat compared with the same quarter one year ago.