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BMC Software Inc. (NASDAQ:BMC) reported fourth quarter 2011 earnings per share of 64 cents, which missed the Zacks Consensus Estimate of 66 cents.

Revenue

Reported revenue of $562.0 million increased 14.0% year over year. The company is witnessing a significant shift in customer preference as major players in the IT industry are adopting cloud computing solutions, SaaS or virtualization in order to upgrade their existing infrastructure. With a clear focus on these identifiable areas, the company has been able to drive sales.

BMC's growth strategy seems to have been accretive as suggested by improved bookings. Service automation, SaaS and cloud solutions witnessed significant upside in customer demand.

License revenue was $250.6 million, up 24.5% from $201.3 million reported in the year-ago quarter. Maintenance revenue increased 1.5% to $258.6 million versus $254.9 million in the year-ago quarter. Professional services revenue rose to $53.0 million in the reported quarter from the year-ago quarter level of $35.1 million.

Bookings

BMC's total bookings in fiscal 2011 increased 13.0% from the prior year, while fourth quarter bookings jumped 21.0% year over year. Moreover, license bookings in fiscal 2011 grew 20.0% and in the fourth quarter, it climbed 16.0% year over year.

ESM license bookings in the fourth quarter of 2011 and fiscal 2011 increased 18% and 21.0%, respectively. Total MSM bookings for fiscal 2011 increased 4.0%.

Operating Results

Operating income on a GAAP basis was $141.8 million, up 22.8% from $115.5 million reported in the year-ago quarter. Excluding special items like severance cost and amortization of intangible assets, but including stock-based compensation expense, non-GAAP operating income was $166.8 million in the reported quarter, up 21.8% year over year from $136.9 million.

Net income on a GAAP basis was $122.5 million or 67 cents per share compared with $118.8 million or 64 cents reported in the year-ago quarter. Excluding special items such as amortization and severance costs, but including stock-based compensation expense, non-GAAP net income was $117.2 million or 64 cents per share compared with $103.8 million or 56 cents reported in the year-ago quarter.

Balance Sheet, Cash Flow & Share Repurchase

BMC Software generated $290.4 million in cash flow from operations in the fourth quarter, up from $180.3 million reported in the previous quarter. The company exited the quarter with cash and investments of $1.68 billion, up from $1.54 billion in the previous quarter.

During the fourth quarter, the company continued with its repurchase activity, spending $140.0 million to buy back 2.9 million shares. In fiscal 2011, BMC repurchased 10.6 million shares for a total amount of $439.0 million. At the end of the year, the company had $631.0 million remaining in its current share repurchase program.

Guidance

For fiscal 2012, BMC expects non-GAAP diluted earnings per share in the range of $3.21 to $3.31, reflecting a year-over-year increase of 9% at the midpoint. BMC expects fiscal 2012 cash flow from operations between $825 million and $875 million, reflecting an 11.0% improvement at the midpoint.

Conclusion

BMC reported decent fourth quarter results. Moreover, the company provided a positive outlook for fiscal 2012. Acquisitions have expanded BMC's product portfolio and further facilitating more comprehensive solutions offering. Growth prospects in most of its business segments, position in the government vertical and strong cash generation abilities are other positives.

However, we are a bit apprehensive about growing competition from big players such as International Business Machines Inc. (NYSE:IBM), Hewlett-Packard Company (NYSE:HPQ), EMC Corp. (NYSE:EMC) and CA Inc. (NASDAQ:CA), which bundle hardware and software offerings.

Currently, BMC has a Zacks #2 Rank, which translates into a short-term Buy rating.

Source: BMC Reports Decent 4Q