Edwarda,
Thanks for your insights.
It seems to me that the key issue is the reason or reasons behind the shortfall. There are at least four possibilities:
1. Y2K lockdowns. Remember that CA also warned about this. It seems to me that in the enterprise software niche this could very well show up in decreasing deferred revenues well in advance of the turn of the year. Remember that PSFT and BAANF were both hit by Y2K effects a year and a half in advance of the event. The more complex the software and installation tasks the lengthier the effect.
2. Loss of contracts due to pricing pressures from competitors. If this is the case I would expect BMCS to react by lowering prices. This possibility portends lowered earnings prospects for all companies in this niche.
3. Loss of contracts because of inferior or insufficient product offerings. This implies an intermediate-term loss of market share, and is the most dangerous of the three.
4. Finally, BMCS may simply have blown it when it came to forecasting. Max said that year-end deals didn't come in as anticipated. It could simply be that the sales force was overly optimistic.
With regard to the Y2K explanation, it is possible that if this correct, the slowdown may last for some time. Many companies decided to install new software rather than upgrading legacy software. If that's the case there are two implications. First, it might mean that past growth was artificially high. This was the explanation that PSFT offered as deferred revenues began to decline. And second, it might mean that companies that purchased software and hardware in anticipation of Y2K will spend most of their IT budget on installation and integration efforts.
As I recall Max's comments, there was a clear upbeat tone for the future. As I said before, I am thinking of buying BMCS, but prudence dictates that I await clarification from the company.
I realize that my comments add nothing in terms of clarifying the situation, but at least articulating them allows me to put the eventual numbers into some sort of conceptual framework.
But one thing is clear. If we are looking at a temporary situation, and if the earnings estimates for next year remain at around $2.10 this stock looks like a compelling value for a growth company.
TTFN,
CTC |
