Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Michael Turits - Raymond James.
Michael Turits - Raymond James
On mainframe, I understand how bookings would be down if there is less renewal opportunity, but I would have thought that the mainframe license revenues would have been smoother. It looks like it was down the same amount. So why didn’t we see that down a smaller degree?
Stephen B. Solcher
On the license side I think it’s a direct correlation between the license bookings decline for the mainframe unit, which was down 17% in the quarter. Again, the license revenue number was down a corresponding percentage.
Michael Turits - Raymond James
My thought would have been that some of your license revenue ought to be on a term basis, I was expecting that to be smoother. Don’t generally you think of those as correlating?
Stephen B. Solcher
We do see more of our revenue comes off the balance sheet on the mainframe side but we still have to go get current period revenue so it will have an impact, and I think it’s directly correlated. We didn’t see a big move in the deferral rate for the mainframe side so it’s directly, in my mind, correlated with the lack of license bookings on that side.
Robert E. Beauchamp
And that’s primarily associated with the term length shortening somewhat. If you adjust for the average term length reducing we are pretty pleased with what we saw off the mainframe this quarter.
Michael Turits - Raymond James
On expenses, obviously you were first [inaudible] on margins, opex was down $13.0 million sequentially on a non-GAAP basis. Of that sequential $13.0 million drop in opex, how much of that was from currency? And especially with ESM margins, I think you said being 28%, how much more room to go in terms of margin expansion does BMC have, especially if that’s now going to be 33% for the year?
Stephen B. Solcher
I think on the currency side on expense, the vast majority of the decline on expense was currency but I think it’s fair to put in the Blade number in the year-ago period. So I kind of say that that normalized itself. So whatever pro forma expense would have been in the previous period, that had an offsetting amount from currency. So our true expense is down 4%.
And how much further it can go, I think we said 33% margins but if you look at ESM for the full year, we are only talking about doubling that from 8% the year before so we are looking at 16%, 17% ESM margins, and I think there’s a way to go on the ESM side.
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