Contrarian Corpus
activist full deck proxy fight
2012-05-31 · 72 pages

BMC Software BMC

N 5 Narrative
V 4 Visual
C 4 Craft
Original source ↗

The three reasons

  1. 1

    BMC has underperformed every peer and index over 1-, 2-, 3-year and YTD windows

  2. 2

    Management repeats the same 'fix the sales force' story year after year with no results

  3. 3

    Multiple clear pathways to value: strategic sale, PE buyout, levered buyback, margin fix

Primary demands

  • Elect Elliott's four nominees (Hogan, Schaper, Dillon, Mattes) to the BMC Board
  • Undertake a full strategic review with no sacred cows
  • Explore a sale to a strategic acquirer (IBM, Oracle, HP, Cisco, EMC, Dell, Symantec, CA)
  • Explore a sale or carve-out of MSM to a private equity buyer
  • Return capital via a $400mm-$2bn debt-funded share buyback and initiate a dividend
  • Pursue operational review targeting ~10pp of operating margin expansion

KPIs cited

3-year total stock return vs. proxy peers
BMC +21.9% vs. proxy peers +86.9% (65.0pp underperformance)
3-year total stock return vs. S&P GSSI Software Index
BMC +21.9% vs. iShares Software +104.9% (83.1pp underperformance)
FY2012 ESM license bookings growth
Actual -11% vs. management's prior guidance of '+low 20s', a ~30pp miss
ESM operating margin
Stuck at ~21% for FY2010-2012 despite >$1bn segment revenue
Normalized operating margin vs. CA
BMC 27.7% vs. CA 35.9% (800 bps lower)
Professional Services gross margin
0.8% in FY2012 vs. IBM 14.8%, HP 11.9%, CA 6.0%
LTM revenue growth vs. Big 3
BMC 5.2% vs. HP Software 12.0%, IBM Software 10.5%, CA 8.7%
M&A efficiency
27 acquisitions for $2.4bn aggregate; median 5.8x revenue multiple; implied organic growth of only $369mm over 10 years
ServiceNow missed opportunity
ServiceNow revenue grew from $1.9mm (2007) to $92.6mm (2011) at 166% CAGR while BMC dismissed SaaS
Dividend yield
BMC 0.0% vs. U.S. tech peer median 2.4%
Illustrative operating margin uplift
Potential 32-39% adjusted margin vs. current 27.7% LTM (~10pp improvement from Prof Services, S&M, R&D, G&A)

Pattern membership

Where this document fits across the library's 12 rhetorical / structural patterns.

Notable slides (10)

Notes

Proxy-fight deck filed as EX-1 exhibit to Elliott's preliminary proxy for the 2012 BMC Annual Meeting. The PDF is a scrape of the SEC EDGAR HTML rendering, which spreads each slide across two PDF pages (content page + footnote continuation) plus blank spacers — so the 72 'pages' correspond to ~35 actual slides (numbered [1]-[35] in corner). Notable rhetorical moves: (1) a multi-year chronological sequence of CEO Bob Beauchamp quotes (FY2007-FY2012) used to expose repeated broken promises about separating ESM/MSM and 'strengthening the sales force'; (2) a 'What Might Have Been' ServiceNow revenue trajectory chart arguing BMC missed the SaaS wave; (3) a 'Where Was the Board's Oversight During This Colossal Failure?' call-out tying bookings guide-downs directly to board accountability; (4) five-pillar diagnostic framework (execution, capital stewardship, operations, competition, governance) that maps cleanly onto the four-pillar prescription (strategic sale, PE sale, capital return, operational review). Branding quirk: uses BMC's own logo in the top-right of every slide rather than Elliott's — reinforcing the 'we're acting for BMC shareholders' framing. Subsequent outcome (not in deck): Elliott settled in Aug 2012 for 2 board seats; BMC was ultimately taken private by Bain/Golden Gate at ~$46.25/share in May 2013.