BMC raises financial forecast as revamp continues

BMC reported a loss, but raised forecasts for the rest of the year as it released results from its most recent quarter, in which it cut 10 percent of its staff.

BMC Software reported a loss, but raised forecasts for the rest of the year on Tuesday as it released financial results from its most recent quarter, during which the company cut more than 10 percent of its staff.

The job cuts are part of a turnaround effort that also found BMC increasing investment in its Business Service Management (BSM) line of software for linking IT and business operations, while cutting back costs for its struggling distributed systems management software business.

Helped by a number of acquisitions over the past year, BMC reported overall revenue growth of 7 percent, to US$348.3 million, and license revenue growth of 14 percent in the quarter ended June 30. Excluding a batch of special charges such as restructuring costs, BMC reported net income of US$43.9 million, or US$0.20 per share, ahead of the US$0.13 per share consensus estimate of analysts polled by Thomson First Call. Including those charges, BMC had a US$41.1 million loss during the quarter.

The company pleased investors by lifting its expectations for the rest of its 2006 fiscal year, which ends in March. BMC forecast revenue of at least US$1.49 billion this year, up from US$1.46 billion in 2005. Shares of BMC (ticker symbol: BMC) rose 8 percent in Wednesday morning trading on the New York Stock Exchange, to $20.34.

Smith Barney analyst Tom Berquist cautioned against reading too much into BMC's better-than-expected results, noting that BMC's revenue and bookings growth compares against a very weak first quarter last year. "For us to get more positive on the story, we would like to see better revenue growth and more consistent revenue performance going forward," he wrote in a research note.

BMC's weak spot continues to be its distributed systems management line, which includes its flagship Patrol systems management and monitoring software. That business still makes up a significant portion of BMC's revenue, but new license sales have slowed. BMC executives are working on an overhaul of that product line, which the company will roll out in phases throughout this year and next.

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