BMC to cut 12 percent of staff

BMC will lay off around 12 percent of its staff, as sales and earnings in its recently-concluded fourth quarter are expected to disappoint.

BMC Software will lay off between 825 and 875 employees, or around 12 percent of its global workforce, as part of a plan to reduce costs and improve its bottom line, the Houston maker of systems management software announced Monday.

The layoffs will result in a pre-tax charge of between US$50 million and US$60 million, most of which BMC will take in fiscal 2006's first quarter, which ends in June, and the rest in the second and third quarters. BMC expects the workforce reduction to generate annual expense savings of about US$100 million. Affected employees will begin to be notified this week, a spokesman said.

Managing director of BMC A/NZ, Paul Williams, confirmed the announcement would see some jobs lost in Australia but said he was unable to provide further details at this stage. BMC currently employs 120 people in this country.

Based on preliminary estimates for its 2005 fourth quarter, ended March 31, revenue and earnings will fall below expectations the company provided in February, the company said.

Revenue is now expected to be in the US$388 million to US$400 million range, down from the previous forecast of between US$410 million and US$425 million. Meanwhile, pro forma earnings per share excluding certain special items, will be in the US$0.08 to US$0.12 range, down from a range of between US$0.17 to US$0.22. Actual earnings per share are expected to be between a loss of US$0.01 and a profit of US$0.03.

The restructuring also includes a reassesment of BMC's investment in its three main product lines -- products for managing mainframes, for managing distributed Unix systems and for helping companies align IT expenditures with business needs.

BMC plans to increase investments in the latter business, which it calls service management, because it is growing and has good margins, said BMC President and Chief Executive Officer Robert Beauchamp, during a conference call with analysts Monday, according to a transcript of his comments provided by BMC. This service management business includes BMC's Remedy, Magic and Marimba product lines.

Meanwhile, the mainframe management product business, which includes the Mainview line, is highly profitable and generates significant cash flow, and BMC will invest in it to maintain those trends, while also recognising that this business' revenue is expected to be flat or decline slightly industry-wide, Beauchamp said.

Finally, BMC's distributed system management product business, which includes the Patrol line, overall isn't profitable and its results fell below expectations, he said. BMC plans to cut costs in this business, and expects that it will be helped with the introduction of new products based on agentless technology next year, he said.

"The goal of the restructuring efforts is to take immediate action to significantly improve the profitability of the company. The restructuring will also allow us to increase investment in our growth businesses, primarily our service management business," Beauchamp said.

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