BMC Software Earnings: Margins Shrink as Net Income Falls

Rising costs hurt S&P 500 (NYSE:SPY) component BMC Software Inc. (NASDAQ:BMC) in the fourth quarter as profit dropped from a year earlier. BMC Software is a software vendor offering an extensive portfolio of software solutions, including mainframe, distributed and virtualized systems, applications, databases, and IT process management functions.

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BMC Software Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for BMC Software Inc. fell to $70.7 million (43 cents per share) vs. $122.5 million (67 cents per share) a year earlier. This is a decline of 42.3% from the year-earlier quarter.

Revenue: Rose 0.4% to $564.7 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: BMC Software Inc. reported adjusted net income of 74 cents per share. By that measure, the company beat the mean estimate of 66 cents per share. Analysts were expecting revenue of $561.4 million.

Quoting Management: “BMC ended fiscal 2012 with encouraging momentum. With increased sales capacity, powerful additions to our technology portfolio and expanded global alliances, we are more strongly positioned than ever to capture the growing demand among enterprises for a comprehensive, heterogeneous and seamlessly integrated IT management platform,” said Bob Beauchamp, BMC’s chairman and chief executive officer. “Our cloud and SaaS initiatives continue to generate strong growth, our MSM business remains a solid performer and our Global Services business is gaining size and scale.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 4.5 percentage points to 71.7% from the year-earlier quarter. In that span, margins have contracted an average of 2.4 percentage points per quarter on a year-over-year basis.

Revenue has increased for four quarters in a row. Revenue increased 1.5% to $548.2 million in the third quarter. The figure rose 10.8% in the second quarter from the year earlier and climbed 9% in the first quarter from the year-ago quarter.

The company topped expectations last quarter after falling short of forecasts in the third quarter with net income of 69 cents versus a mean estimate of net income of 70 cents per share.

Net income has dropped 7.8% year-over-year on average across the last five quarters. Performance was hurt by a 42.3% decline in the most recent quarter from the year-earlier quarter.

Looking Forward: Expectations for the company’s next-quarter results are lower than they have been. Over the past sixty days, the average estimate for first quarter of the next fiscal year has fallen from 64 cents per share to 63 cents. At $2.76 per share, the average estimate for the fiscal year has fallen from $2.77 ninety days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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