Leading large enterprise software company BMC Software Inc. (BMC: 36.58 -0.45 -1.22%) recently announced that its strategic alliance with enterprise cloud computing company Salesforce.com Inc. (CRM: 92.09 -0.85 -0.91%) has led to the rapid adoption of the cloud platform by IT professionals.
BMC Software noticed that customers/IT majors are rapidly adopting its BMC ServiceDesk on the Force.com solution to deploy cloud-computing applications for ready access to data in real-time.
Being a global computing platform, cloud computing is becoming the information technology (IT) industry’s sweet spot and is capturing significant interest, imagination and investment in the business world.
Cloud computing refers to a platform through which usage of software and application programs is made easy through their ready availability on the Internet, thus minimizing their cost of ownership.
According to the U.S. research firm Gartner Inc., revenue from global cloud based services are likely to increase 16.6% from 2009 to 2014, reaching $148.8 billion by the end of 2014.
We believe BMC Software is in a favorable position to cash in on opportunities available in the cloud computing space. Notably, last month BMC Software introduced two new IT service management solutions, BMC Remedy OnDemand and BMC ServiceDesk, on Force.com. These products are based on the cloud computing platform and are expected to provide cost effective solutions to the customer.
Apart from cloud computing, acquisitions remain a major growth driver for BMC. This strategy has helped the company expand the product portfolio, leading to more comprehensive solutions.
BMC Software reported fourth quarter revenue of $491.0 million, marking year-over-year growth of 3.0% due to strong performances across its three segments. However, EPS of 65 cents missed the Zacks Consensus Estimate by 5 cents. Despite the earnings shortfall, BMC Software provided decent fiscal 2011 guidance as it remains optimistic about its growth prospects.
Growth prospects in the SaaS segment, continuous winning of government deals and strong cash generation abilities are positives for the company. However, we remain bit apprehensive about the challenges posed by industry leaders like IBM(IBM: 129.25 -0.86 -0.66%), Hewlett Packard Company (HPQ: 46.21 -0.68 -1.45%), EMC Corporation (EMC: 18.68 -0.42 -2.20%) and CA Technologies(CA: 19.36 -0.22 -1.12%).
We have short term Hold recommendations for BMC Software Inc.