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BMC Optimizes Mainframe Cost

Zacks Equity Research

BMC Software (BMC) has introduced an analytical tool – BMC Cost Analyzer – that reduces mainframe software expenses by approximately 5% to 20%. Most importantly, the new tool lowers the costs of International Machines Corp’s (IBM) mainframe software by more than 20.0%.

The BMC Cost Analyzer for zEnterprise strategizes cost reduction techniques by identifying peak workloads, work load placement and workload management. This innovation from BMC is particularly important as IBM mainframe licensing charges are increasing by more than 7.0% annually, according to BMC. Swiss Re Group, an insurance provider, has adopted the BMC Cost Analyzer.

Thus, BMC’s analytical tool is expected to gain traction in the mainframe market due to its cost saving capabilities and ability to provide management with detailed insights into the cost drivers. For these purposes, BMC has launched six mainframe products that aim at efficient workload management and cost optimization.

However, there are other companies such as CA Technologies (CA) that provide similar tools. Thus, gaining market share might prove to be difficult for the company.  Moreover, competition from companies such as Salesforce.com (CRM) and Oracle Corp. remains a headwind for the company, going forward.

BMC’s decision to privatize will help to revamp and restructure its business model while capitalizing on its core competency.

The company reported a tepid first quarter wherein the top and bottom line missed the Zacks Consensus Estimate. Going forward, we remain concerned due to weaker expenditure from different governments, continuing macro economic sluggishness and constrained IT spending projections.

Currently, BMC has a Zacks Rank #5 (Strong Sell).

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