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Technology Stocks : BMC Software -- Ignore unavailable to you. Want to Upgrade?

To: john dodson who wrote (1435)	10/5/2000 8:57:57 AM
From: michael97123	Respond to of 1492

EXPLAINS IT A BIT Story for:[CPWR.O] COMPUWARE CORP 05 OCT 2000:20:01 U.S. business software makers suffer blues from IBM10/05 02:08 By Ilaina Jonas NEW YORK, Oct 4 (Reuters) - Two of the biggest makers of software that manage computer systems of large businesses signaled that for a second successive quarter they will report disappointing earnings as their clients continue to postpone spending decisions. Much of the weakness is because companies decided to delay buying new software until International Business Machines Corp. starts selling its new mainframe computer later this year, analysts said on Wednesday. IBM, the world's largest maker of computers, says that about two-thirds of corporate data sit on its mainframes. On Tuesday, Islandia, N.Y.-based Computer Associates International Inc. said it expected to earn 50 cents to 54 cents a share in its fiscal second quarter, short of the 56 cents a share consensus forecast from analysts according to First Call/Thomson Financial. On Wednesday, BMC Software said it expected earnings for the second quarter, ended Sept. 30, to be just 10-12 cents per diluted share, at least 50 percent below the 24 cents Wall Street analysts had been estimating. "In general, the systems management software sector continues to suffer from the uncertainty surrounding IBM's upcoming mainframe, as evidenced by the pre-announcements by Computer Associates and BMC Software," said J.P. Morgan analyst P. Sterling Auty. The announcements were reminiscent of the fiscal first-quarter. In July, Computer Associates said its earnings would fall short of expectations. Then like dominoes, BMC and Farmington Hills, Mich.-based Compuware Corp. followed with similar warnings. All three saw their revenues, earnings and eventually their share prices drop, also amid the numbing impact of the IBM product pipeline. BMC's shares tumbled after Wednesday's news, closing down more than 6 percent, or $1-1/8 at $16-1/2. During the day, its shares hit a new 52-week low of $13. Compuware, which has not issued a warning, also saw its shares sink to a new 52-week low of $7-3/16 before closing at $7-15/16, down more than 2 percent. However, shares of Computer Associates rose after initially falling in Tuesday's after-hours trading. They closed up $3-9/16, more than 14 percent, to $28, as investors breathed a sigh of relief that it did not take a bigger hit. "Most investors expected worse, especially on the revenues," J.P. Morgan analyst P. Sterling Auty said. "Nobody expects much." Computer Associates said its revenues would be between $1.67 billion and $1.7 billion, below the analysts' consensus forecast of $1.74 billion. It also was hit by the impact of the weak euro on its dollar revenues from Europe. BMC said its second-quarter revenues are expected to be between $320 million and $330 million, well below the $370 million expected by analysts. "The biggest issue is the continuation of uncertainty of IBM, which finally announced the pricing of its new product but obviously too late,' said Deutsche Banc Alex. Brown analyst W. Christopher Mortenson. On Tuesday, IBM finally unveiled the new mainframe and the operating system foundation that runs it. IBM said it would charge customers based on their use rather than traditional method based on total system capacity. The severity of the problems facing each enterprise management software company depends on how much of their revenue comes from products that run on IBM's mainframe computer servers, analysts said. About 60 percent of BMC's business depends upon its products that run on IBM mainframes and operating systems, while the comparable figure for Compuware is 50 percent and for Computer Associates 35 percent, analysts said. Since staff are the lifeblood of most software companies and their biggest cost, they have little ability to cut back when facing short-term difficulties. That means profit margins soon get hurt as revenues slip, Mortenson said. The new IBM products are not expected to roll out until around December, which means that there may be some signs of improvement in the current quarter but the best chance for a pickup for the software companies will be in the first quarter of calendar 2000. "The bigger quarter is going to be in March," said Parker/Hunter Inc. analyst Timothy Slevin. Computer Associates and BMC Software said they would report their second-quarter results Oct. 24. Compuware said it would announce results Oct. 19. ((Ilaina Jonas, New York Newsdesk, 212-859-1676))