BMC Software Wins Motorola Deal - Analyst Blog

Leading large enterprise software company BMC Software Inc. (BMC) recently announced that the Australian wing of mobile phone maker Motorola Inc. (MOT) will deploy its Remedy IT Service Management Suite (ITSM).

Motorola will integrate BMC Software’s solution into its service businesses to provide better and secured Information Technology (IT) support to its growing customer base in Australia.

Information Technology service management helps professionals in the same field manage information technology assets in accordance with customers’ business requirements. BMC Software’s ITSM Suite reduces complexity in delivering customer support and integrating change management and asset management efficiently.

With the help of the solution, Motorola will be able to manage customers’ assets without complex paper work and provide them improved and automated services. Efficient IT services extended toward key customers (including local governments, mining, resources and retail sectors) throughout Australia will not only increase demand for Motorola’s product and services, but also will open up new business opportunities in the region.

BMC Software’s ITSM also provides users with a real-time view of the customers’ requirement through its Aeroprise Mobility solutions. This feature will aid Motorola’s technical personnel to address problems or requirements as soon as it occurs and provide solutions accordingly, with the help of any hand-held device or laptop.

We are encouraged by BMC’s wins across multiple industry segments. In addition to the telecom sector, the company has recently announced a defense deal from U.S. Forces Japan (“USFJ”) and a healthcare deal from Novant Health.

Apart from IT solutions, cloud computing services and acquisitions remain major growth drivers for BMC Software. The company has been expanding its product portfolio to cater to the growing cloud computing market.

BMC Software reported first-quarter revenue of $461.0 million, marking year-over-year growth of 2.4% due to decent growth in bookings. The rise in revenues was attributed to the growth in License and Maintenance segments, partially offset by a decline in the Professional Services segment. BMC Software expects total bookings and revenues to increase in the mid single-digit range on a reported basis. However, the company maintained its previous expectation for non-GAAP earnings per share, which ranges from $2.84 to $2.94.

Opportunities for growth in the SaaS segment, a spate of successful government deals and strong cash generation abilities are positives for the company. However, we remain apprehensive about the challenges posed by industry leaders such as International Business Machines Inc. (IBM), Hewlett Packard Company (HPQ), EMC Corporation (EMC) and CA Technologies (CA) owing to their strong position in the areas of cloud computing and IT solutions. Additionally, BMC Software’s exposure to Europe is also a cause for concern.

As licensing revenue deferral rates have been increased, there will be a negative impact on revenue and earnings in the near term. This could pressure prices over the next 1–3 months. Consequently, we have a short term Sell rating on BMC shares, as indicated by the Zacks #4 Rank. Our long-term outlook remains Neutral, as we expect shares to pick up again after investors have had the chance to digest the impact of the higher deferrals.
 
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