Good News from BMC, Compuware, and Indian IT Services Market

BMC Software Inc and Compuware Corp. reported positive fourth quarter and fiscal year results. Additionally, BMC also announced the acquisition of BladeLogic Inc., a provider of data center automation software. In other news, a new report projects the outlook for Indian IT Services market will not experience a slowdown in its major segments.

Focal Points:

• BMC released its revenue and profit numbers for the fourth quarter and fiscal year 2008. Total revenues for the quarter increased 11 percent year-over-year to $467 million. Net income for the quarter on a general accepted accounting principals (GAAP) basis was $97 million. This is compared to a net income of $63 million for year-ago quarter. Total revenues for BMC's fiscal 2008 rose 10 percent to $1.73 billion compared to 2007's revenues of $1.58 billion. Net income on a GAAP basis was $314 million; whereas in 2007 BMC had a net GAAP income of $216 million. In a move to strengthen its Business Service Management (BSM) platform, the company announced it is acquiring BladeLogic for approximately $800 million. The two company's solution portfolios are already integrated. Customers of the combined solution can expect a 90 percent improvement in IT operational efficiency in 90 days, as well as address the critical challenges of compliance, virtualization, and availability, company officials boasted.
• Compuware reported its financials for its fourth quarter and fiscal year 2008. Total revenues for the quarter increased eight percent year-over-year to $338.9 million. Net income for the quarter on a GAAP basis was $61.2 million. This is compared to a net income of $67.5 million for the same period the previous year. During the fiscal year ended March 31, 2008, revenues were $1.23 billion, up from $1.21 billion in the previous fiscal year. Net income on a GAAP basis was $134.4 million compared to $158.1 million in fiscal 2007. Software license fees were up five percent over the previous year and maintenance revenue grew four percent while professional services fees slipped 3.5 percent year-over-year. In the fourth quarter mainframe sales led the way, growing 40 percent quarter-over-quarter and nearly 80 percent year-over-year while Changepoint license sales for the year were up more than 25 percent.
• According to a survey conducted by The Wall Street Transcript Online the Indian IT services market has not seen a significant pullback in business beyond the financial services companies. The number of respondents expecting funding delays peaked in March at 43 percent but has dropped to 34 percent, which is still higher than the December 2007 number of 28 percent. Nonetheless, there has not been slowdown beyond the banking universe. During the past four or five years, IT spending growth has been about 2 to 3 percent. Whereas, the average offshore outsourcing company has been growing 25 to 30 percent, which means the growth rates of these companies likely correlate with IT budget share penetration, according to the report. The weak link in the sector was the infrastructure outsourcing segment. Demand in this area is moderating, as contracts are being unbundled because clients are concerned with vendors' poor execution.

Experton Group believes the services and software sectors are showing strength, as companies seek to reduce IT costs through automation, data center consolidation, and outsourcing. With the resurgence of the mainframe, it is not surprising to see strong gains in Compuware's mainframe software and scheduling solutions. Data center consolidation, energy conservation, and cost cutting are helping BMC enjoy growth in its software offerings. Both companies will see added competition this year as new competitive products arrive on the market to meet business needs. The future of Indian IT services companies will be more challenging going forward as the arbitrage advantage shrinks and executives consider alternative cloud computing and software-as-a-service (SaaS) solutions. IT executives should review their current data center operations processes and strategies to determine if new solutions can provide additional cost or productivity gains.