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BMC Software Future Rests on New Orders

By    |   Monday, 19 March 2012 10:38 AM

BMC Software (BMC) provides business management computer software systems to medium-sized and large businesses. The company's future revenue results are based on orders taken during the year. Higher orders thus point to a more positive future.

BMC divides its Software as a Service (SaaS) business into two divisions. ESM refers to Enterprise Software Management and MSM is Mainframe System Management.

About 60 percent of revenue is generated by the ESM segment. However, MSM has a higher operating margin, 60 percent vs. 25 percent, and generates about 60 percent of operating income.

Revenue sources are software licensing at 40 percent, maintenance at 50 percent and professional services at 10 percent.

The fiscal third quarter ended on Dec. 31. For the nine-month period, reported revenue of $1.61 billion was up 6.9 percent from $1.50 billion a year earlier. Non-GAAP earnings were $2.51 per share for the period, up from $2.22.

Company management forecasts full fiscal year earnings of between $3.26 and $3.34 per share, compared to $2.99 earned in fiscal year 2011.

Decline in new orders

In the 2012 fiscal third quarter, BMC reported that new order inflow declined by 12 percent. MSM 12-month trailing orders were up 22 percent but ESM orders dropped by 23 percent. Contracts with customers have an average term of about two years. Remember that MSM business is more profitable for the company.

In early 2012, BMC announced the acquisition of Nomura Software, which provides integrated management solutions for medium-sized businesses. The deal is expected to close by the end of March.

BMC Software has $800 million available on an ongoing share buyback authorization. At the end of the fiscal third quarter the company reported holding $1.4 billion of cash and marketable securities and a $1.9 billion order backlog.

Of the 13 analysts following BMC Software, six rate the stock a strong buy, one a moderate buy and six maintain a hold rating.

The company reports next on May 3.

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Monday, 19 March 2012 10:38 AM
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