Shares declined as much as 9.5 percent to $40.26 in late trading after the company said in a statement yesterday that profit excluding some items will be $3.35 to $3.45 a share for fiscal 2013, which ends in March. The Houston-based company had previously forecast $3.49 to $3.59. Analysts had anticipated $3.56 on average, 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.”
BMC had been little changed at $44.48 at the close in New York.
In a statement, Beauchamp said the company needs to be “more consistent and disciplined” in the way it secures big contracts. Management is “scrutinizing the entire company to improve our operational discipline,” he said.
The company 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, he said. Many customers are requiring BMC management to visit their offices before closing a purchase, Beauchamp said. The requests are likely to continue in the current quarter, he 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,” the CEO 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.