Compuware Corporation (CPWR) reported preliminary results for the fourth quarter of fiscal 2011.
In the fourth quarter, Application Performance Management (comprising Vantage and Gomez) license fees and subscription revenues grew 53% year over year.
Revenue from Covisint grew approximately 65% year over year. Uniface license fees grew approximately 77% year over year. Changepoint license fees grew approximately 14% year over year. Professional Services revenues grew more than 5% year-over-year with over 15% contribution margin.
Mainframe solutions demonstrated significant year over year growth. Compuware stated that two significant mainframe agreements that were scheduled to close were pushed into fiscal 2012.
Out of the two, one was a federal contract which could not be signed due to the government budget impasse. Another contract was pushed to the first quarter as a global bank put its capitalization policy under review. These contracts will contribute $ 60 million to the top-line and roughly four to five cents to the bottom-line.
Consequently, Compuware now expects EPS in the fourth quarter to come around 13 to 15 cents, down from the Zacks Consensus Estimate of 19 cents. Both the outstanding contracts will be completed and hence Compuware will provide an upside to fiscal 2012 guidance.
Earlier, Compuware reported in-line results for the third quarter. Recently, Compuware divested slower-growth and less-profitable products and professional services contracts to focus more on the APM and mainframe businesses to drive solid growth in the coming quarters. The renewal rate for the mainframe business continues to be strong, indicating healthy growth in the coming quarters.
Management expects the rapid growth of its APM business and secure collaboration businesses to diversify the company’s revenue mix by adding recurrent revenue and additional visibility.
We currently maintain a Neutral recommendation on Compuware Corporation. Our recommendation is supported by a Zacks #3 Rank, which translates into a short-term rating of Hold.
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