BMC Software Shifts Gears And Bets On The Cloud
06 Juillet 2010 - 3:00PM
Dow Jones News
SAN FRANCISCO (Dow Jones)-BMC Software Inc. (BMC) made its name
doing the unglamorous work of streamlining corporate data centers.
Now it is riding one of the technology industry's biggest waves:
cloud computing.
Over the past 18 months, BMC has begun helping clients build and
manage more than 150 cloud-based data centers. The company's
customers include Concur Technologies Inc. (CNQR) and Rackspace
Hosting Inc. (RAX).
BMC also has introduced new cloud products. In May, it rolled
out BMC Cloud Lifecycle Management, software for building and
operating cloud-based data centers. The Houston-based company also
plans to introduce more cloud-related IT products.
"The cloud has been remarkable for us," BMC Chief Executive Bob
Beauchamp told Dow Jones Newswires in an interview. "In the last
nine months or so it has really taken off."
While BMC's revenue from cloud computing is still small--roughly
3.5% of revenue since the company entered the field--it holds the
potential for significant growth. Global cloud-services revenue is
expected to grow 16.6 % to $68.3 billion this year and more than
double to $148.8 billion by 2014, according to market watcher
Gartner Inc.
"Success in cloud computing will mean the difference between
existing or not existing within a few years," said Glenn O'Donnell,
a Forrester Research Inc. analyst. "The new battleground is around
the cloud."
While its cloud products have yet to affect BMC's financial
performance dramatically, the company's shares have outperformed
the broad software sector, which has swooned. Since the beginning
of the year, BMC has dropped about 13%, much less than competitor
CA Technologies Inc. (CA), which is down roughly 20%. The broad
S&P Software Index has fallen 18%.
Over the past five years, BMC shares have risen about 90%, while
CA shares have dropped about 34%. On Friday, BMC shares closed at
$34.76, down 0.7%.
Behind BMC's performance is steadily growing profits. Over the
last three quarters, BMC has seen profit rise an average of 36.6%.
By comparison CA's profits grew 29% over the same period.
A CA spokeswoman said Islandia, N.Y.-based CA had a broader
product portfolio than BMC and is "moving fast to accelerate our
growth."
BMC's growth should continue when it reports first-quarter
fiscal 2011 earnings next month. The company will get a special
boost at that time: A $15 million deal that was expected to close
in the fourth quarter wasn't completed until a few minutes after
the quarter's close and will now accrue to the first quarter.
Of course, BMC faces plenty of competition. Rival CA has more
than double BMC's revenue. BMC also competes with International
Business Machines Corp. (IBM) and Hewlett-Packard Co. (HPQ),
although they're more diversified. Oracle Corp. (ORCL) and
Microsoft Corp. (MSFT) also have launched competitive products.
BMC's jump into cloud computing isn't the first time the company
has switched gears. BMC was founded 30 years ago as a maker of
software for mainframe computers. As the market shifted away from
mainframes, BMC moved into server automation and management in the
mid-1990s.
Currently, about two-thirds of BMC's revenue comes from
server-based tools--such as BladeLogic Server Automation Suite and
Atrium Orchestrator--that let IT departments and data centers work
more quickly and efficiently.
Philip Potloff, the chief information officer at auto
information company Edmunds Inc., has been a BMC customer since
2008. He says BMC's software dramatically reduces the amount of
time his team spends on projects.
For example, it used to take Edmonds's staff about four hours to
deploy one server. With BMC products, he says, they can deploy 100
servers in less than an hour
"It's all about the capacity to move faster," he said.
-By Jeanette Borzo, Dow Jones Newswires; 415-765-8230;
jeanette.borzo@dowjones.com
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