System System Software Suppliers Slip Seriously
Shares of Computer Associates, BMC Software, Compuware Corporation, and
others have suffered serious setbacks on the stock market in recent days
due to shortfalls in revenue. Most vendors blame it on a failure to close
large deals near the end of the quarter. Once again, the dreaded Wall
Street "whisper number" has not been made, and the stock market has reacted
harshly. Sales of mainframe software have softened, causing much of the
examples, shares in Computer Associates (NYSE:CA) dropped as much as 42
percent at one point, even though their revenue has increased to approximately
$1.25 billion, compared to $1.22 billion in the same quarter last year.
BMC Software (NASDAQ: BMCS) dropped 31 percent after it announced an approximate
50 percent drop in revenue compared to the same quarter in the prior year.
Many of the vendors are blaming the delays in contract closings on customers
who are delaying purchases until the release of IBM's new G7 IBM mainframe
hardware, and general softness in the mainframe business.
Associates held its annual analyst conference in conjunction with CAWorld
in New Orleans in June, and gave no indication that there would be problems
with forecasted revenue, particularly in the EMEA (Europe, Middle East,
and Africa) market. According to a recent statement from Sanjay Kumar,
president and COO of CA, "We intend to work aggressively to address the
performance issues in our European business."
Chappell, Executive Vice President of Corporate Communications and Investor
Relations for Compuware (NASDAQ: CPWR) stated, "We are very disappointed
with our software sales results. In spite of our best efforts to work
closely with the investment community to set reasonable and attainable
expectations for the quarter, the softness of the market had a significant
impact on our results. Once again, we had several large deals that did
not come in at the end of the quarter."
These companies are direct competitors, and are all suffering the same
fate in the stock market. This indicates to TEC that it is the general
market that is in a downturn, and not necessarily the software firms themselves.
Customers should continue to evaluate software from these companies, while
keeping a watchful eye on their market capitalization. In particular,
Computer Associates has been fond of acquiring competitors (most recently
Platinum Technology and Sterling Software, the two largest software acquisitions
in U.S. history). Either BMC or Compuware could be next if they are not