BMC Software Inc. (BMC:US), a maker of software that helps manage corporate computer networks, plans to buy back $1 billion in shares within the next year after reviewing options, including a possible sale of the company.
The repurchase represents about 15 percent of BMC’s outstanding shares, and $750 million of the authorized fund will go to buying back shares during the third quarter that ends Dec. 31, the company said in a statement yesterday.
The announcement, which came alongside BMC’s fiscal second- quarter earnings report, follows a half-year period of uncertainty since activist shareholder Elliott Associates LP disclosed its stake in May and pressed the company to consider a sale. The buyback appears to quell uncertainty about BMC’s strategic direction, said Abhey Lamba, an analyst at Mizuho Securities USA Inc. in New York.
“It definitely conveys the message that they are focused on core execution,” he said in an e-mail yesterday.
The company also considered alternatives to the buyback including stock splits, spin-outs, acquisitions or a sale, BMC said. The Houston-based company had attracted buyout interest from private equity investment firms KKR & Co. and TPG Capital, people close to the situation told Bloomberg News in October.
“BMC’s board of directors (BMC:US) unanimously agreed that the repurchase program is the best outcome for BMC’s shareholders,” the company said, citing the results of an “extensive review.” The process didn’t lead to serious sale talks, said one person with direct knowledge of the situation.
The software company, whose products let customers manage networks of personal computers and servers, update software and manage PC users’ support requests, has seen its earnings growth (BMC:US) slow the past two years. The company reported profit excluding certain items of 88 cents a share for the quarter ended Sept. 30, matching the average estimate of analysts, according to data compiled by Bloomberg.
Sales decreased 1.5 percent to $548.2 million. For the fiscal year that ends in March, BMC reiterated its earnings forecast of $3.49 to $3.59 a share. Analysts on average expect $3.48.
Under pressure from Elliott to consider a sale, BMC had hired Morgan Stanley and Bank of America Corp. as advisers, according to the same person with direct knowledge of the situation.
In July, BMC Software added two directors, Jim Schaper and John Dillon, chosen by Elliott. The new board members, along with directors Lou Lavigne and Mark Hawkins, oversaw the review with assistance of outside advisers, BMC said in the statement.
BMC rose less than 1 percent to $40.98 at the close in New York. The stock (BMC:US) has gained 25 percent so far this year.
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