BMC Q2 profit falls, board OKs share buyback plan

BMC Software Inc.'s BMC fiscal second-quarter earnings fell 15% as the business-software company was hurt by lower licensing and professional services revenue and higher operating expenses.

The company's board also approved a $1 billion stock buyback program, which at recent prices represents about 15% of BMC's shares outstanding.

Shares of BMC, which affirmed its outlook for the fiscal year, were up 2.7% at $41.80 in recent after-hours trading. Through Wednesday's close, the stock is up 24% this year.

The moves bring the BMC's total buyback authorization to about $1.5 billion. The company said it expects about $750 million of the repurchases to occur in the current fiscal quarter. The decision follows a strategic review by the board.

Chairman and Chief Executive Bob Beauchamp said, "After a series of discussions with major shareholders earlier this year, we took an even more rigorous approach to our regular review, including designating four board members as a working group to oversee it."

BMC has been grappling with higher costs, soft demand and unfavorable exchange rates recently. In the fiscal first-quarter BMC posted nearly flat revenue that it partly attributed to unsatisfactory productivity in its sales force, particularly in the enterprise-services-management unit that includes BMC's cloud business. However, the company also has expected that sales-force productivity will improve as newer employees gain more experience.

For the quarter ended Sept. 30, BMC reported a profit of $97.8 million, or 61 cents a share, down from $114.7 million, or 65 cents a share, a year earlier. Excluding share-based compensation and other items, earnings were up at 88 cents from 87 cents.

Revenue decreased 1.5% to $548.2 million as 5.5% growth in maintenance revenue--the biggest contributor to the top line--was offset by licensing-revenue and services-revenue declines of 8.9% and 5.1%, respectively.

BMC Software Inc.
BMC, +9.78%
authorized $1 billion of new stock buybacks after lower licensing revenue and compensation costs pushed down second-quarter earnings 15% from a year ago, as expected.

The business-software provider also affirmed its full-year guidance despite lower revenue in the latest quarter, striking an optimistic tone amid a parade of negative predictions from information-technology companies in recent weeks.

Chairman and Chief Executive Bob Beauchamp said in an interview that the software provider's product pipeline "continues to strengthen" while its sales force--which suffered attrition problems that hurt revenue earlier this year--expands, growing 28% in the latest quarter.

"We can't really factor that in beyond what we can just see," he said. "No one knows what's going to happen with the fiscal cliff. No one knows what's going to happen in Europe."

Mr. Beauchamp declined to say whether BMC had attracted any unsolicited takeover offers but said the board regularly reviews its strategic options, including possible sales, and decided more share repurchases made good use of its cash.

The moves bring BMC's total buyback authorization to about $1.5 billion. The company said it expects to buy back about $750 million of stock in the current fiscal quarter.

The Wall Street Journal earlier this month reported BMC was engaging Bank of America Merrill Lynch to assist it with a strategic review, including seeking a possible buyer for the company. BMC in July agreed to nominate two directors chosen by activist hedge fund Elliott Management, changing the makeup of the company's board.

For the quarter ended Sept. 30, BMC reported a profit of $97.8 million, or 61 cents a share, down from $114.7 million, or 65 cents a share, a year earlier. Excluding share-based compensation and other items, earnings were up at 88 cents from 87 cents.

Revenue slipped 1.5% to $548.2 million as 5.5% growth in maintenance revenue--the biggest contributor to the top line--was offset by licensing-revenue and services-revenue declines of 8.9% and 5.1%, respectively.

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