BMC shares drop after company cuts full-year view

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SAN FRANCISCO (AP) — BMC Software Inc.’s stock sank Thursday after the business software maker cut its outlook for the full fiscal year. It had predicted a range of adjusted earnings that could miss analyst expectations.

THE SPARK: Late Wednesday, BMC reported second-quarter results that beat Wall Street views, though net income fell 13 percent because of rising expenses. The company called its performance for the period “mixed” and said its overall bookings fell 16 percent from last year.

BMC also said it now anticipates fiscal 2012 adjusted net income of $3.21 to $3.31 per share — lower than the $3.25 to $3.35 per share it forecast in July. And BMC is looking for revenue to grow “in the mid-single digits” over the $2.1 billion it reported in fiscal 2011. Previously, it was expecting revenue to grow in the “high single to low double digits.”

The Houston-based company cited a number of factors for the outlook reduction, including a decline in bookings for its enterprise service management business.

At the time, analysts polled by FactSet were expecting adjusted net income of $3.29 per share on $2.24 billion in revenue.

THE ANALYSIS: In an investor note, Jefferies analyst Aaron Schwartz said that while some expected BMC to reduce its guidance, the company’s estimates were “well below expectations.”

Schwartz said BMC is currently working on “a fairly heavy sales model rebuild covering sales compensation, attrition, quota attainment, sales management and pipeline build.” He thinks it will take at least several quarters to fix these issues.

“Clearly, the degree of change and growth deceleration was greater than we had expected,” he said.

The analyst kept his “Buy” rating for the stock, but he lowered his price target to $44 from $50.

SHARE ACTION: BMC shares fell $4.78, or 12.4 percent, to $33.84 in afternoon trading Thursday. Earlier in the day, the stock traded as low as $32.91 — the cheapest it has traded since August 2009.