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BMC to Restructure After Earnings Warning
By Clint Boulton

July 7, 2003

Buckling a bit under delays in customer purchasing, management software maker BMC Software (Quote, Chart) Monday said it would restructure after warning in preliminary financial results for the first quarter that revenues will be as much as $15 million less than previously expected.

The Houston vendor, which competes with Computer Associates (Quote, Chart) and Veritas (Quote, Chart), said it anticipates total revenues to be between $305 million to $312 million compared to estimated range of $320 million to $335 million the company provided in April.

Earnings per share for the first quarter are estimated to be in the range of one penny to 4 cents per common share, compared to the earnings per share of 5 to 10 cents the company had expected. License revenues are estimated to be in the $105 million to $110 million range.

Blaming the delayed purchases on the uncertainty that comes hand in hand with the current lagging economic climate, President and CEO Robert Beauchamp said BMC completed 16 license transactions worth more than $1 million each in the first quarter of fiscal 2004, compared to 25 license transactions in excess of $1 million in the same quarter of last year. The company posted no deals over $5 million.

“During the quarter our pipeline supported our estimated range,” Beauchamp said in a conference call. “However, we experienced an unexpected increase in the number of transactions that slipped at the end of the quarter. As a result our closure rates declined significantly compared to either the fourth quarter or the first quarter of last year. There were over $50 million in license transactions that slipped at the end of the quarter. We’re actively working with our customers on the majority of these transactions.”

Beauchamp said the company was very disappointed with the results from the sales teams in North America and Germany, and pledged to lay off personnel in those divisions who did not meet their quotas. He also promised BMC would pump up investments in successful areas, such as its purchase of Remedy earlier this year.

To reduce costs and boost profitability, BMC may also shed additional product lines, akin to its recent divestitures of its enterprise propagation products and most recent sale of BMC Patrol Storage Manager line to EMC.

Beauchamp said the company’s financial position is strong, with over $1 billion of cash and securities by the quarter’s end, and marketable cash flow from operations estimated to be more than $100 million.

BMC Software will issue final results July 28.

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