A Stronger Case for a BMC Sale

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BMC Software Inc. (NASDAQ: BMC) has been under fire to sell itself or to shake up its valuation.  A filing of a presentation by Elliot Associates, L.P. this morning may give investors hope.  At the same time, a research report may be dashing those hopes.

Jesse Cohn of Elliot noted, “I write to you again on behalf of Elliott Management and our collective funds, holders of 6.5% of BMC Software common stock.  Our letter today is to inform you that we have filed a presentation with the SEC laying out in greater detail our perspectives on BMC’s historical and current issues, as well as the opportunities available to BMC’s Board to maximize stockholder value in the future…. Throughout the last two weeks, we also have continued to hear from numerous BMC stockholders who agree with our view of the Company, encourage our continued process, and who, like us, remain frustrated by the Board’s intransigence and apparent unwillingness to actively engage in a thoughtful approach to maximizing stockholder value. As detailed in our presentation, the Board’s behavior is particularly disappointing given the Company’s significant underperformance due to poor management execution and a lack of engaged Board oversight.  After studying these issues for several months and doing extensive research, we have outlined in our presentation the changes needed to bring fresh insight to the Board and the steps the Company should take immediately to deliver long-overdue value to stockholders.”

The 35 page presentation here has what is probably more than anyone ever wanted to know about BMC’s case for a buyout.

While Mizuho started some software players with Buy ratings this morning, the firm only initiated coverage with a NEUTRAL rating and a $44 target price on BMC.  Unfortunately, that is not exactly a strong value case considering that BMC closed at $43.00 on Wednesday.

To show just how strong the case is for this leading to a sale, BMC shares are down $0.10 right after the open and the 52-week range is $31.62 to $56.55.  Thomson Reuters also has a consensus analyst price target of $43.45 and that is not exactly the most bullish software outlook on Wall Street.

JON C. OGG