BMC Software Inc., a maker of programs that help companies update servers and personal computers, fell after forecasting fiscal 2013 profit that missed analysts’ estimates, a sign it’s struggling to clinch big contracts.
The shares declined 6.2 percent to $41.71 at the close in New York, the biggest decline since October 2011. The Houston-based company said yesterday that profit excluding some items will be $3.35 to $3.45 a share for fiscal 2013, which ends in March. That’s less than BMC’s prior forecast of $3.49 to $3.59 and trails analysts’ average $3.56 projection, according to data compiled by Bloomberg.
Activist shareholder Elliott Associates LP pressed BMC to consider a sale last year, unsettling customers and making it harder for the company to clinch deals, BMC Chief Executive Officer Bob Beauchamp told analysts on a conference call yesterday. The company had two large contract renewals pushed to the March quarter from the December period, crimping results.
“BMC underperformed across all metrics for the quarter,” and deals in the mainframe and server-software businesses didn’t get closed, Abhey Lamba, an analyst at Mizuho Securities USA Inc., wrote in a research report. “Despite having completed its accelerated share repurchase program, the company lowered its EPS target for the year, which is clearly disappointing.”
The company said it needs to be “more consistent and disciplined” in the way it secures big contracts, according to the statement. Management is “scrutinizing the entire company to improve our operational discipline,” Beauchamp said.
BMC added board members and initiated a $1 billion share buyback to assuage Elliott’s complaints that it wasn’t doing enough to maximize shareholder value. Competitors are “aggressively” capitalizing on the pressure by Elliott, prompting many customers to seek personal visits from BMC management before completing purchases, Beauchamp said.
Beauchamp said during a conference call with analysts that he’s undertaking an operational review aimed at directing spending toward better performing products to increase earnings, cash flow and operating margin amid low revenue growth. The company is trying to improve profitability even as revenue this year is projected to grow in the low single digits.
Web-delivered software, cloud-computing management products and tools for managing mobile devices are selling well and will get a greater share of investment compared with underperforming products, he said.
“We’re going to find a way to move funds to these growth areas,” Beauchamp said. “It’s just moving faster.”
BMC kicked off the review after the end of the quarter on Dec. 31, according to Mark Stouse, a spokesman.