BMC Software Inc. (BMC) recently introduced a new set of Middleware Management solutions, which will enable customers to manage and monitor middleware across the contemporary data center, allowing IT departments to deliver reliable business services through a more in-depth view of enterprise applications and the transaction paths that make them run.
This new solution is expected to help enterprise IT systems grow and facilitate an in-depth view into application flow paths to clearly understand the transaction flow of an application. It will also enable middleware management in public, private or hybrid cloud environments. This apart, the application will help to identify and analyze middleware and application problems before they occur.
Moreover, BMC has pioneered the business service management concept, which helps to combine the IT operations of companies keeping in mind their business needs. BMC’s leadership position in the BSM segment arises from several years of internal development and complementary acquisitions, which have enhanced its core business.
The company remains focused on both the distributed and mainframe domains. BSM helps rationalize IT processes, which in turn automates workflow, thus allowing BMC to gain traction at many large enterprises. The company is continuously expanding its BSM offerings, which is expected to generate greater business volume.
Apart from Business Service Management and Middleware Management Solutions, we expect systems management spending to rise as enterprises look to increase efficiency and IT flexibility through private as well as public clouds.
The analysts believe that BMC will gain market share and witness strong growth in its Cloud Lifecycle Management offering, which accounted for 10.0% of ESM license bookings in 2011. Lastly, BMC expects a roughly 20.0% gain in productive sales headcount in fiscal 2012 and a decrease in attrition.
Moreover, analysts also believe that BMC’s cloud partnerships with Cisco (CSCO), Accenture (ACN) and Salesforce.com (CRM) will remain strong going forward, and we are encouraged by the fact that the company is ramping up indirect distribution. Although the partnership with Cisco Unified Computing System (UCS) has not been accretive, Cisco as well as Accenture contributed to a number of wins for the company last year given the focus on cloud implementations. Management is working to increase its leverage in the indirect channel.
Acquisitions and new product innovations have expanded BMC’s product portfolio and facilitated a more comprehensive offering. Growth prospects across most of its business segments, position in the government vertical and strong cash generation abilities are other positives.
However, we are a bit apprehensive about the growing competition from big players such as International Business Machines Inc. (IBM), Hewlett-Packard Company (HPQ), EMC Corp. (EMC) and CA Inc. (CA), which bundle hardware and software offerings. The debt level also appears high.
BMC currently holds a Zacks #3 Rank, which implies a short-term Hold rating.
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