BMC Software's Best Bet: Its Own Stock (BMC)

This morning, BMC Software Inc. (NYSE:BMC) has announced a $1 Billion share buyback plan, which at current prices would yield more than 35 million shares (if completed instantly).  This is in addition to the $171.1 million remaining under the current buyback authorization plan.  Unfortunately no real terms or conditions have been disclosed regarding the timing.

BMC Software is a company that if you could point to a share buyback as being a better solution to just making acquisitions elsewhere would emulate that description.  The company has historically not been a real strong dividend candidate with its 0.00% payout and its current $28.09 close of last week is toward the lower-end of a recent $26.33 to $36.92 52-week trading range.  About 18 months ago, shares confirmed a breakout above an old $15 to $20 range that had been in place for almost 3 years and it appears the company wants to try to re-energize the share movement.

BMC has also been somewhat reluctant to make big acquisitions.  If it hits the $1.68 EPS target expected from Wall Street for Fiscal March-2008 estimates, it has a mere 16.7 forward P/E on a pro forma basis.  The current market cap is only $5.6 Billion, so it looks like this actually may be the cheapest use of its nearly $1.3 Billion in liquid cash and equivalents on its books.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.