BMC Software is one of the world’s largest software vendors. We provide system management, service management and automation solutions primarily for large enterprises. Our extensive portfolio of software solutions spans mainframe and distributed systems, applications, databases and IT process management functions. We also provide our customers with maintenance and support for our products and perform services for software implementation, integration, IT process design and re-engineering and education. We were organized as a Texas corporation in 1980 and were reincorporated in Delaware in July 1988. Our principal corporate offices are located at 2101 CityWest Boulevard, Houston, Texas 77042-2827. Our main telephone number is (713) 918-8800, and our primary internet address is http://www.bmc.com.
Management’s Discussion and Analysis of Financial Condition and Results of Operations: Overview
During fiscal 2009, the United States and global economies entered into recession. Despite the challenging macroeconomic environment that developed during the fiscal year, we continued to focus on our leadership in BSM by responding to IT executive needs to reduce cost, increase business impact, improve service quality, manage risk and provide greater transparency. Our two business segments, ESM and MSM, continue to provide the focus necessary to align our resources and product development efforts to meet the demands of the dynamic markets we serve.
Our fiscal 2009 financial performance in terms of revenue, expense management, operating income and earnings per share was strong, despite the continuing uncertainty in the global markets. While our operating cash flows for the fiscal year fell short of our expectations, due primarily to elongated contract approval cycles that we started to see in our fourth quarter that caused a higher percentage of our invoicing activity to occur in the latter part of the quarter, we nevertheless recorded strong transactional bookings results for the fourth quarter and fiscal year. Additionally, in the fourth quarter we closed an increased number of large transactions with more complex terms and conditions that resulted in a higher percentage of license transaction bookings being deferred and recognized as revenue ratably over the underlying contractual maintenance terms rather than recorded entirely upfront at the time of the transactions. The primary reasons for license revenue deferral are discussed further under Results of Operations—Software License Revenue, and Critical Accounting Policies—Revenue Recognition, in MD&A herein.
Overall, we believe that our strong fiscal 2009 performance reflects the tangible value that our solutions offer customers in both good and difficult economic environments, along with our ability to control and manage our expenses.
In April 2008, we acquired BladeLogic, a leading provider of data center automation software, for total purchase consideration of $854.0 million. This was a significant acquisition for us as it has expanded our service automation offerings for server provisioning, application release management, and configuration automation and compliance. During the fiscal year, BladeLogic was successfully integrated into our operations.
In June 2008, we completed the issuance of $300.0 million in senior unsecured notes due 2018 (the Notes). Net proceeds from this offering amounted to $295.6 million, which were used for general corporate purposes.
We continue to enhance shareholder value by returning cash to shareholders through our stock repurchase program. During fiscal 2009, we repurchased approximately 10.7 million shares for a total value of $330.0 million.
Going into fiscal 2010, we expect that we will continue to see elongated customer contract approval cycles, similar to the fourth quarter, which may have the impact of delaying operating cash flows from quarter to quarter, and that our license revenue recognition ratable rates will be higher due to more complex customer contract terms and conditions and other factors that preclude upfront license revenue recognition.
It is important for our investors to understand that a significant portion of our operating expenses are fixed in the short-term and we plan a portion of our expense run-rate based on our expectations of future revenue. In addition, a significant amount of our license transactions are completed during the final weeks and days of each quarter and, therefore, we generally do not know whether revenue has met our expectations until after the end of the quarter. If a shortfall in revenue were to occur in any given quarter, there would be an immediate, and possibly significant, impact to our overall earnings and, most likely, our stock price.
Because our software solutions are designed for and marketed to companies looking to improve the management of their IT infrastructure and processes, demand for our products, and therefore our financial results, are dependent upon corporations continuing to value such solutions and invest in such technology. There are a number of trends that have historically influenced demand for IT management software, including, among others, business demands placed on IT, computing capacity within IT departments, complexity of IT systems and IT operational costs. Our financial results are also influenced by many economic and industry conditions, including, but not limited to, general economic and market conditions in the United States and other economies in which we market products, changes in foreign currency exchange rates, corporate spending generally, IT budgets, the competitiveness of the IT management software industry, the adoption rate for BSM and the stability of the mainframe market.
The current highly volatile and uncertain economic conditions globally, forecasts of contracting IT spending and the factors discussed in the preceding paragraph may adversely impact our future revenue, operating results, financial condition and cash flows. While our operating plans include continued discipline in controlling expenses and ongoing efforts to simplify processes and increase efficiencies, there can be no assurance that expense control efforts would offset such adverse conditions.
As of March 31, 2009, we had approximately 5,800 full-time employees. We expect that our continued success will depend in part on our ability to attract and retain highly skilled technical, sales, marketing and management personnel.
We file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings and all related amendments are available free of charge at http://www.bmc.com/investors. We post all of our SEC documents to our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our corporate governance guidelines and the charters of key Board of Directors committees are also available at http://www.bmc.com, as is our Professional Conduct Policy and Code of Ethics, as amended from time to time. Printed copies of each of these documents are available to stockholders upon request by contacting our investor relations department at (800) 841-2031 ext. 4525 or via email at firstname.lastname@example.org.