Q&A with BMC Chief
cnbc.com
BMC Software Inc. is trying to get out from under its dependence
on mainframes for its software sales, which make up about two-thirds of revenue, and
build its corporate networks. But that plan hasn't been clicking in the last two quarters.
Enter Robert Beauchamp: Tapped as chief executive in January, after joining BMC's
sales force in 1998. Beauchamp, 41, replaced Max Watson, who stepped down, yet
remains BMC chairman and a director.
Beauchamp inherits BMC at a time when IBM {IBM, News, Boards}, the mainframe king,
delayed delivering new products, thereby pushing off mainframe software sales and
hitting mainframe software plays hard.
BMC, Compuware Corp. {CPWR, News, Boards}
and Computer Associates International Inc. {CA,
News, Boards} in turn, each warned of lower
results, sending the sector into a tailspin.
Subsequently, BMC warned in October that it
would miss expectations for 2001, including its
second and third quarters. Since then, BMC met
the lowered second-quarter estimate and beat the
revised third-quarter expectations by 5 cents a
share, earning 24 cents a share.
But BMC seems to pulling out of the tailspin,
though -- shares are 59 percent above its 52-week
low at 13 in December.
CNBC.com: So, you've had about a month to get used to the chief executive hat - how does it fit?
Beauchamp: I am having a blast, it's a lot of fun. The energy level is sky high. Morale is sky high and attrition
low.
CNBC.com: You mentioned morale, and the attrition rate, exactly how are they doing?
Beauchamp: Last year was a tough year for BMC and for the industry as a whole. People left to get rich with
dotcoms and our industry was not faring so well. The enterprise software business was a tough business
last year.
Now, our attrition rate is well below the industry rate. Last time I checked, our European rate is in the single
digits.
CNBC.com: You replaced Watson, who is now chairman. How is your relationship with Watson?
Beauchamp: Max hired me, and we've known each other for 12 years, and the relationship is wonderful.
CNBC.com: Goldman Sachs earlier this month put out a note that there's a rebound in the mainframe
cycle is under way - are you seeing this?
Beauchamp: We're an enterprise software company, so we sell across a number of platforms, not just
mainframes.
We had a pretty significant rise in [mainframe] business.
In the third quarter, [IBM mainframe] OS 390 licensing revenue was more than 50 percent of license revenue.
In the second quarter, it was more distributed, with more than 50 percent was in UNIX and Windows
platforms.
CNBC.com: Was that unusual that mainframes got such a chunk of sales, or that other platforms
dominated in the second quarter?
Beauchamp: People want to put it in one bucket or another, but we don't think of it that way. We go to the
customers and ask them what applications they have and what software they need not the other way
around.We're in the systems management business.
CNBC.com: The First Call consensus of 21analysts has BMC pegged to earn 24 cents in the
fourth-quarter, are you comfortable with that number?
Beauchamp: I can't comment on guidance. The SEC and Reg FD...
CNBC.com: I got it, had to give it a shot. Back to mainframes: BMC has been trying to wriggle out of its
dependence on mainframes for other areas, such as corporate networks - what are some of your ideas
on this?
Beauchamp: It's not about diversifying, it's about filling out the suite.
If you got an application, such as SAP R3, and you want to manage the database, then we would come in and
help you manage the application. There's just dozens of dozens of components, not just mainframes, but
other platforms and they all have to work together.
CNBC.com: So where do you have to filling in to do?
Beauchamp: Storage management and network management.
Perform [SA] brought to us the network, now we can tell [customers] where in the network they have a
problem.
(On Feb. 12, BMC agreed to buy French concern Perform SA for $23 million in cash. Perform develops
software for network performance management and the provisioning of quality-of-service indicators.)
CNBC.com: What does Perform specifically bring to the table?
Beauchamp: For one, Dashboard, which gives you the health of the network, and Visualese, how much traffic
was running through which part of the network.
CNBC.com: And you mentioned storage, as well. Do you plan acquisitions in that area?
Beauchamp: Storage management has been something we've been developing internally. We announced
the plan in October, and we expect to have a product shipment in the first quarter.
CNBC.com: Compuware has insulated itself somewhat from the mainframe cycle through services
revenue, how does your services business work toward that end, if at all?
Beauchamp: I don't view it as padding. As long as our customers have mainframes, we're going to offer
support.
We have a unique position in services: we build our services business to help our software customers. We
don't go after services revenue for the sake of bolstering the top line.
(Service revenue) will grow and it's important for it to grow, but it's independent of our software sales.
CNBC.com: What are the challenges in delving into the corporate networking?
Beauchamp: We entered the space from a unique angle. We're adding the network layer to our network
management system. So, when an application is failing, we want to be able to point to where the problem is.
For us, the network is a piece of the whole pie. |
