2 Software Makers’ Shares Plunge on Earnings Warnings
Business software maker BMC Software Inc. Wednesday said its fiscal first-quarter profit would fall well shy of Wall Street expectations because of weakness in its mainframe business.
Shares of BMC fell 40% as it became the second major maker of enterprise software, or software designed to run business computer systems, to warn of weaker profits and revenues this week.
Late Tuesday, Computer Associates Inc. warned that its profit would fail to meet expectations. Both companies have cited weak sales of software for mainframe computers.
Shares of BMC dropped $14.19, or 40%, to $21.31 on Nasdaq. Computer Associates shares plunged $21.69, or 42%, to close at $29.44, on the New York Stock Exchange.
Shares of International Business Machines Corp., which makes more than 90% of the world’s mainframe computers, slipped $4.50, or 4%, to close at $105, on the Big Board.
BMC said it expects to report net earnings of $47 million to $51 million and earnings per share of 18 cents to 21 cents, excluding the amortization of goodwill and intangible assets, for the three months ended June 30. It had earned $105.3 million, or 42 cents, in the same period a year earlier.
Analysts had been expecting earnings of 46 cents a share, according to First Call/Thomson Financial.
BMC said its revenue would be 6.5% to 9% lower than a year ago, in a range of $365 million to $375 million compared with the $400.7 million logged in the same period last year.
“We depend each quarter on a high percentage of license revenue closing in the last days or day of the quarter. We experienced weakness in our mainframe business at quarter end,” BMC Chairman, President and Chief Executive Max Watson said.
In a conference call, Watson pointed to a new generation of hardware expected from IBM this year as a possible reason for hesitation on the part of BMC customers: “[There was] a reluctance on the part of our customers to enter into an agreement. IBM has a new generation of equipment coming out.”
