) fourth-quarter 2013 earnings per share (including stock based
compensation of 5 cents and its related tax effects) of 4 cents
were lower than EPS of 12 cents reported in the year-ago quarter.
Reported earnings also missed the Zacks Consensus Estimate by a
Results were negatively impacted by lower number of deals
closed in the Application Performance Management (APM) and
Mainframe businesses during the quarter. Most of the deals were
pushed to fiscal 2014, primarily due to uncertain IT budgets and
the slow recovery in the European IT spending environment.
Total revenue for the quarter decreased 9.8% on a
year-over-year basis to $239.9 million and lagged the Zacks
Consensus Estimate of $247 million.
Revenues from the APM business unit decreased 3.5% from the
year-ago quarter to $77.2 million and were within management's
range of $76 million - $78 million.
Though Mainframe revenues decreased 19.1% year over year to
$81.5 million, it marginally exceeded management's guided range
of $79 million - $81 million. Moreover, revenues from Compuware's
Changepoint, Uniface and Professional Services were down 31.1%,
1.5% and 10.1%, respectively, on a year-over-year basis. However,
the Covisint business unit reported a 20% year-over-year
The company reported operating expenses (before restructuring,
impairment and advisory fees) of $220 million, which were down
4.2% from the year-ago quarter. As a percentage of revenues,
operating expenses expanded 530 basis points (bps).
Operating income (before restructuring, impairment and
advisory fees) was down 45.2% year over year to $19.9 million.
Operating margins contracted 530 bps year over year due to lower
revenues and higher operating expenses as a percentage of
Net income (including stock based compensation) was $8.7
million, which was down from $27.1 million reported in the
Exiting the fourth quarter, cash and cash equivalents amounted
to $89.8 million, up from $64.9 million in the previous quarter.
Long-term debt stood at $18 million.
For fiscal 2014, management expects revenues of $1 billion (up
7% year over year) while GAAP earnings per share are expected in
the range of 35 cents - 37 cents. The company expects to save $45
million on costs in fiscal 2014.
Among the business units, Compuware expects the APM segment to
grow 15% while Changepoint revenues are expected to increase 19%.
Management also expects revenues from Uniface to grow 2% and
Covisint by 20%.
However, revenues from Mainframe are expected to decline 5% in
Though the company reported a tepid quarter, Compuware's
product portfolio, which comprises mainframe software,
project-management tools collaboration technology and
performance-management services for cloud computing and mobile
applications should see good growth.
Moreover, the company's initiatives to reduce costs, gain new
programs and introduce new products are expected to benefit the
company, going forward.
However, Compuware operates in an intensely competitive
landscape and competes with the likes of
BMC Software Inc.
International Business Machines Corp
) with respect to one or more offerings. Moreover, execution
challenges (related to acquisition, geography and people) are
possible headwinds going forward.
Currently, Compuware has a Zacks Rank #4 (Sell).
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