BMC Software BMC
BMC's strong assets are trapped under an unengaged board and CEO Beauchamp who keeps missing his own targets; electing Elliott's four tech nominees opens a sale and long-overdue value.
Thesis
BMC owns leading IT-management software used by over 25,000 customers but has underperformed proxy peers by 65 points over three years as CEO Bob Beauchamp repeatedly missed his own ESM license-booking guidance — projecting +20% for FY2012 and delivering -11%. Management was demonstrably late to SaaS (dismissing it in 2007 and conceding by 2012), ceding the category to ServiceNow (166% CAGR, 2007-2011), while low-margin Professional Services became the only growth engine at 0.8% operating margin versus peers at 6-15%. Elliott, holding 6.5%, argues the incumbent board lacks relevant enterprise-software, SaaS/cloud and large-cap M&A experience to oversee a turnaround. The ask is to elect four technology-executive nominees — Hogan (HP), Schaper (Infor), Dillon (Salesforce/Engine Yard) and Mattes (HP/Siemens) — who will drive a review spanning strategic sale, PE buyout with optional MSM carve-out, capital return, and operational overhaul.
SCQA
BMC is a leading IT-management software vendor serving more than 25,000 customers across mainframe (MSM) and distributed (ESM) environments, with strong products but a stock that has lagged every relevant benchmark over 1-, 2- and 3-year windows.
CEO Bob Beauchamp repeatedly over-promised ESM growth and under-delivered — guiding +20% FY2012 bookings that ended at -11% — while dismissing SaaS as ServiceNow compounded at 166% CAGR, and the current board lacks the tech-sector skillset to hold management accountable.
Elect Elliott's four technology-executive nominees so the board can run an open strategic review: sale to a strategic acquirer, sale to a financial sponsor (potentially carving out MSM), efficient capital return via buyback and dividend, and operational oversight with no sacred cows.
Up to ~10pp of operating-margin expansion, 15-28% FY13 EPS accretion from a levered buyback, and meaningful takeout premiums from strategic (IBM/Oracle/HP/EMC) or PE buyers well above the ~$38 pre-campaign share price.
The three reasons
- 1
BMC has underperformed every peer and index over 1-, 2-, 3-year and YTD windows
- 2
Management guided ESM bookings +20% and delivered -11% — a colossal board-oversight failure
- 3
Multiple pathways exist: strategic sale, PE buyout, levered buyback, and margin fix
Primary demands
- Elect Elliott's four nominees (Hogan, Schaper, Dillon, Mattes) to the BMC Board at the 2012 Annual Meeting
- Conduct 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 MSM carve-out to a private-equity buyer
- Return capital via a $400mm-$2bn debt-funded buyback and initiate a dividend
- Pursue operational improvements targeting ~10pp of operating-margin expansion
KPIs cited
Pattern membership
Precedents cited
- Elliott's prior tech investments: Novell, MSC Software, Epicor Software, Blue Coat Systems, Metrologic
- ServiceNow 166% CAGR 2007-2011 as the SaaS share BMC failed to capture
- Take-private comps: McAfee, ArcSight, Quest, Sun, Novell, Netezza (premiums 14.9%-60.4%)
- CA Technologies as the directly comparable IT-management-software operator with better margins
Composition what's on the 72 slides
Slide gallery ·
Notes
Stockholder presentation filed as SEC proxy exhibit (EX-1) to Elliott's preliminary proxy statement (filed May 25, 2012) for BMC's 2012 Annual Meeting; cover dated May 31, 2012. The PDF is a scrape of the SEC EDGAR HTML rendering, so each actual slide spans multiple PDF pages (content page + footnote page + blank spacers) — the 72 'PDF pages' correspond to roughly 35 actual slides numbered [1]-[35] in the corner. Signature rhetorical moves: (1) multi-year Bob Beauchamp quote timeline across FY2007-FY2012 on both 'separate ESM/MSM' and 'strengthen the sales force' promises (p23); (2) the FY2012 guide-down waterfall with a red 'Where Was the Board's Oversight During This Colossal Failure?' banner (p27); (3) a 'What Might Have Been — ServiceNow Revenue Trajectory' chart paired with Beauchamp's 2007 'I've met no CIOs who think [SaaS]' quote (p29); (4) a board-skills matrix naming every incumbent director with tenure (Meldon Gafner 25 years, Tom Tinsley 15) to argue the board is stale (p43). Distinctive branding choice: the BMC logo appears top-right on every slide rather than Elliott's — positioning Elliott as speaking for BMC stockholders. No single target price and no formal SOTP, so contains_sum_of_parts is false despite the ESM/MSM segment breakdown.