Compuware reported unimpressive fourth-quarter 2014 results.
Earnings per share were at par with the Zacks Consensus Estimate
while revenues missed the same. Management also slashed its fiscal
2015 revenue guidance. We believe that the ongoing restructuring
plan will benefit the company's profitability, going forward.
Moreover, the divestitures will help the company to focus on its
core business over the long term. Additionally, Compuware's
innovative product pipeline, initiatives to reduce costs and new
program wins will boost profitability. Further, the recent
recognition of Compuware APM as the market share leader by Gartner
is a major positive. However, overdependence on IBM for technology
may rationalize growth prospects to a certain extent. Furthermore,
the intensely competitive landscape is expected to remain a major
headwind going forward. Thus, we reiterate our Neutral
recommendation and set a price target of $10.00.
Founded in 1973 and headquartered in Detroit, MI., Compuware
Corp (CPWR) provides software solutions and services that help in
managing distributed web-based applications and mainframe systems.
The company delivers its software solutions both on-premise as well
as through a software-as-a-service (SaaS) model. It also provides
professional technical services related to mobile application
development, performance engineering and legacy system
Compuware reported revenues of $720.8 million in fiscal 2014.
The company reports in the following three business segments:
Application Performance Management (APM), Mainframe Productivity
and Performance (Mainframe or "MF"), and Application Services
("Covisint or "AS"). Segment details are as follows:
The APM segment is involved in maximizing the efficiency of web,
non-web, mobile, streaming and cloud application related
Mainframe Productivity and Performance solutions (MF solutions)
are especially designed for organizations, which require high
developer productivity, and enhanced service quality at lower
Application Services (Covisint) primarily enables customers to
securely share and integrate vital
information and processes across users, business partners,
customers, vendors and suppliers.
The company's Software solutions (comprising of APM and
Mainframe) contributed 86.5% of revenues in 2014. APM contributed
45.4% of revenues in 2014 while Mainframe chipped in with a 41.1%
share. The remnant 13.5% of net revenue in 2014 came from the
Application Services segment.
In the fourth quarter of fiscal 2014, Compuware successfully
completed the divestiture of its Changepoint, Professional Services
and Uniface business segments to Marlin Equity Partners.
Compuware faces significant competition in most of its operating
segments from the likes of International Business Machines Corp,
BMC Software, CA Inc., Hewlett-Packard, Accenture and Computer
Compuware Corporation (CPWR): Read the Full
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