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BMC Software Inc. (BMC) is scheduled to announce its second quarter 2011 results on October 28. There have been a few changes in analyst estimates since its fourth quarter 2010 results.

First Quarter Overview
First quarter results were decent, with earnings per share (EPS) of 52 cents growing from the year-ago quarter, but missing the Zacks Consensus Estimate of 56 cents.

Revenue of $461.0 million was up 2.4% from the year-ago quarter. The increase in revenue may be attributed to decent growth in bookings. This apart, the company continued to grow in other technology segments such as cloud computing, virtualization and software-as-a-service.

The company reported revenue increases across all its segments except Professional services, which reduced 12.9% from the year-ago quarter. License revenue during the first quarter was $171.2 million, up 2.5% from the year-ago quarter. Maintenance revenue in the quarter was $253.8 million, up 1.0% year over year.

The company also delivered a decent operating margin of 23.0%, flat with the year-ago period. The company also reported healthy bookings of $443.0 million, reporting 14.0% growth from the same quarter last year.

Guidance
For 2011, BMC reiterated its previous guidance of non-GAAP earnings per share in the range of $2.84 to $2.94, which at the midpoint would represent a 9.0% increase compared to the company’s initial 2010 guidance. Total bookings and revenue are expected to increase in the mid single digit range on a reported basis.

For 2010, cash flow from operations is expected to be in the range of $660 million to $710 million, which remains unchanged from the prior guidance.

Agreement of Analysts
Out of the eight analysts providing estimates for the second quarter, none have made any revision in the last thirty days. Neither have the analysts made revisions for fiscal year 2011 or fiscal 2012.

Some analysts continue to believe that BMC is well positioned to benefit from overall improving IT expenditure and increased investment in data center expansion and optimization.

As per the findings of the research firm Gartner, BMC Software is the worldwide market leader in the IT Service Desk and Help Desk space. Based on this, some analysts believe that the company is well positioned to tap growth opportunities in its Software as a Service (SaaS) segment with the help of its ITSM product suites.

On the other hand, some analysts are apprehensive about the challenges posed by industry leaders such as Hewlett-Packard Company (HPQ) and CA Technologies Inc. (CA) owing to their strong positions in areas of cloud computing, in which the company is lagging. BMC Software’s exposure to Europe is also a cause for concern.

Magnitude of Estimate Revisions
Over the last 90 days, the Zacks Consensus EPS for the upcoming quarter has reduced by a penny to 61 cents. For fiscal 2011, it has reduced by 7 cents to $2.47.

Recommendation
The company reported respectable first quarter results, although falling short of our expectation. Moreover, the outlook for fiscal 2011 was positive. Acquisitions have helped expand BMC Software’sproduct portfolio, leading to more comprehensive solutions. Growth prospects in the SaaS and virtualization segments, a favorable position in the government vertical and strong cash generation abilities are other positives.

However, the company needs to seriously work on its cloud computing strategy, and we are a bit concerned about intensifying competition from big players like International Business Machines (IBM), Hewlett-Packard, EMC Corp. (EMC) and CA Technologies, which bundle hardware and software offerings.

BMC Software has a Zacks #3 Rank (short-term Hold).

Source: BMC Software: Earnings Preview