BMC Software (BMC)
is poised to capture an increasing share of the business software market, especially as it grows via M&A deals already in play and as the economy strengthens, analysts contend. The caveat is that the economic rebound for corporations needs to stay the course, which some observers believe is a weakness for the stock going forward.
BMC Software provides IT management solutions primarily for large enterprises. Software solutions include management of IT processes, mainframe, distributed, virtualized and cloud computing environments, as well as applications and databases.
The software company also provides maintenance and support services and assists customers with software implementation, integration, IT process and organizational transformation, and education services.
BMC solutions are used by approximately 15,000 companies and 90 percent of the Fortune 100 in a broad range of industries, businesses and applications. BMC’s 10 largest customers comprised 15 percent or less of total revenue in each of fiscal 2011, 2010 and 2009. No single customer accounted for a material portion of revenue during any of the past three fiscal years, the company reports.
“We continue to invest in our technology leadership, including in the areas of cloud computing and software-as-a-service (SaaS),” management noted in a recent filing.
“In addition to our ongoing product development efforts, we consummated several strategic acquisitions across … during the nine months ended Dec. 31, 2011,” including the purchase of Coradiant, Aeroprise, StreamStep, Neon Enterprise Software, LLC’s IMS software portfolio and I/O Concepts Software Corporation.
“Additionally, in January 2012, we also announced our pending acquisition of Numara Software Holdings, Inc., a leader in service management solutions for mid-market companies. This acquisition within our ESM segment complements our on-premise and SaaS offerings, expanding our IT management solutions to small and mid-market businesses,” BMC management said.
BMC Software is a $6.83 billion market cap firm in the software sector, where the average market cap is about double. Its trailing 12-month P/E ratio is 16.25 compared to 24.58 for the sector. It has a five-year projected price-to-earnings-growth (PEG) ratio of 1.76, compared to 0.03 for its sector.
The 12-month projected earnings per share growth rate is 6.34 percent, vs. 14.12 percent for the sector.
Analysts are bullish on BMC, with buy calls from Raymond James, Ned Davis Research, RBC Capital Markets, Oppenheimer, Jeffries, and others. Aside from a few neutral recommendations, none of the major investment banks hold a negative view on the firm.
“Our hold recommendation reflects our concern about BMC's modest revenue growth and costs surrounding investment expenses.We think much of the increased IT spending this year will be focused on cloud computing and virtualization because these solutions reduce IT operating costs,” S&P analysts recently wrote.
“We believe BMC will benefit from this trend, somewhat offset by sluggish growth in its mainframe business.”
BMC Software next reports on May 9.
© 2013 Moneynews. All rights reserved.