That has created some pretty lumpy financial performances. Having reported a weak first quarter – and been forced to lay off 12% of its workforce as a result – business service management software vendor BMC bounced back in its latest period to 30 June with a 7% rise in revenues to $348.3 million and net income that jumped 39% to $43.9 million compared to the same period last year.
The revival will only be partially sustained in coming months, with the company predicting an anaemic 2% increase in its coming second quarter. That may explain the resignation of BMC‘s chief finance officer George Harrington immediately after the results announcement.
Investment firm Bear Stearns is certainly not upbeat, highlighting slowness in BMC’s two main revenue streams. “While we view the results favourably, we are not convinced at this time that BMC can stabilise its core mainframe database tools business (though it was admittedly strong in the June period) or meaningfully grow its distributed [systems management] business,’ say its analysts in a research report.
Elsewhere in the systems management domain, Computer Associates (CA) reported a similar performance during its first quarter of 2006 – but this time security was the positive influence. Overall, revenues grew by 8% to $920 million, quarter-on-quarter, driven by increased subscription revenue growth, and strong demand for the company’s CA’s security offerings.
Again, though, there was a fly in the ointment. Compared with the same period last year customer bookings dropped in value by 30% to $415 million – a fact that will undoubtedly harm revenues in the coming quarters. CA attributed this fall in new business to a change it made in the way sales representatives are compensated.
In order to pre-empt this looming revenue slump, CA has instigated a restructuring plan of its own. With a 5% reduction of its workforce, CA intends to reduce its operational costs by $70 million annually.
A strong quarter with a more positive outlook was enjoyed by application performance management software vendors Mercury Interactive and Quest Software. Revenues for Mercury jumped 30% to $207.1 million in its second quarter of 2005 – a pace that the company expects to only slow by one or two percentage points during the coming year.
That strong performance was slightly tarnished by the revelations of an internal audit at the company. Investigators found that Mercury had incorrectly reported the value of stock option grants in its quarterly and annual reports. It will now restate all of its main financial statements from 2002 to the first quarter of 2005.
As a result, it has been warned it may be temporarily de-listed from Nasdaq, and it now faces a number of class-action suits from shareholders.
Quest’s revenues, at $107.1 million, gave the specialist in application, database and infrastructure management software a 16% quarter-on-quarter growth rate. However, the primary growth engine was services. While software licence sales were only up 7%, the equally large revenues generated by services rose 28%. The consensus among Wall Street analysts who track the company is that it will end the year with revenues of $460 million, up 8%.
A less successful picture was evident at NetIQ, the integrated systems and security management solutions vendor reported fourth quarter revenues down by 12% to $50.1 million. Of more concern to the company’s management – and to customers – was the fact that new license revenue plummeted 27%. Perhaps management was distracted by the company’s M&A activity. During the quarter, NetIQ sold web analytics software provider Web Trends, making its net profit for the period look hefty at $48.7 million.
To try to combat the downturn, CEO Chuck Boesenberg says NetIQ has narrowed its product focus to the top five strategic product areas, and aligned its corporate structure around those. Nonetheless, bookings for those five strategic products were down by 20% in the quarter.
Positive growth was shared more universally in the business intelligence (BI) sector. Firstly, Business Objects announced that revenues in its second quarter grew by 18% to $262.4 million. Double digit revenue growth was experienced in all of the company’s major regions, despite unfavourable currency conversion rates.
Rival MicroStrategy showed equally impressive growth during the same period. Revenues jumped 31% to $65.4 million with licence revenue up 24%.
Slightly less buoyant, but still enjoying the solid demand for BI, SPSS, which makes predictive analytics tools, produced a 10% increase in revenues to $58.1 million in its second quarter of 2005 and new license revenues grew by 17% to $21 million. The success resulted in SPSS’s highest operating margin for the last five years.
Those numbers are in line with some of the other results in the business intelligence sector in recent months, with Cognos reporting revenue growth of 15% and Hyperion Solutions turning in revenue growth of 7%.