BMC to Lay Off Hundreds of Workers

The software company's corporate restructuring could ax between 825 and 875 employees; the move seeks to shift resources to growth areas, such as BMC's services management and identity management business.

BMC Software on Monday announced a corporate restructuring that calls for the layoff of some 12 percent of the companys work force.

BMC will let go between 825 and 875 employees in a move intended to realign resources behind growth areas—mostly in BMCs services management business and its smaller and more recently established identity management business.

The services management business includes BMCs acquisitions of Remedy Corp., Marimba Inc. and the Magic Solutions assets it acquired from the former Network Associates Inc.

BMC also on Monday said that it doesnt expect to meet its revenue projections released in February for its fourth fiscal quarter.

Rather than the $410 million to $425 million BMC initially expected to generate, its revenues for that quarter are now expected to fall in the range of $388 million to $400 million.

The shortfall is in license revenue; not maintenance revenue.

BMC expects earnings per share to range between a one-cent loss to a three-cent profit.

CEO Bob Beauchamp attributed the disappointing quarter to several factors, including a shortfall in the distributed systems business, weak sales in Europe—particularly in Germany, and a handful of large contracts that were not signed at the end of the quarter as expected.

Within BMCs three main product groups—mainframe, distributed systems and service management—BMCs distributed systems business is not profitable and "continues to fall short of expectations," said Beauchamp in a prepared statement.

That was especially true for BMCs more mature Unix monitoring and tools software.

The layoffs, most of which will occur in this quarter, are expected to yield a savings of about $100 million.

"We believe the actions we have announced today will have a significant positive impact on the profitability of this business. In addition to addressing the expense side of this business, we are addressing the top line by introducing new significantly optimized and improved agentless systems management monitoring technology in fiscal 2006. This streamlined technology will be more competitive and will be less expensive to develop and sustain," said Beauchamp.

/zimages/3/28571.gifClick here to read more about BMCs acquisition of identity management vendor Calendra.

BMCs service management business was the one bright spot in the preliminary earnings release.

It beat expectations for fiscal 2005.

BMC in fact intends to take the savings from its restructuring and apply them to further investment in that growth business.

"It is a difficult market climate," said Stephen Elliot, industry analyst with International Data Corp. in Framingham, Mass.

"Its one thing to buy Remedy, but thatll only get you so far. They have to look at gaps [in BMCs product portfolio], channels—they have a lot of decisions to make over there," he added.

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