Elliott Management, a $20 billion private investment firm and major stockholder in BMC Software, sent BMC's Board of Directors a letter on May 21. The letter was a response to BMC's rejection of Elliott's proposal to pursue a sale of the company.
In the letter, Elliott states: "While we appreciate that the Board responded to our letters, we believe much of what was written is not accurate, requires clarification or raises new questions ... We strongly believe the underlying value in BMC is significantly higher than the current stock price and firmly believe that it is time for BMC to engage in a thoughtful exercise about value creation, rather than stubborn maintenance of the status quo."
Regarding BMC's rejection of Elliott’s five director nominees, Elliott responded: "We are puzzled by the Board’s response, as our nominees most certainly qualify ... Given that BMC is an enterprise software company – and that three of our nominees were formerly CEOs of enterprise software companies – it would seem our nominees would be a welcome addition to the Board of the Company."
Elliott also disputed BMC's claim to have "delivered record results for revenue" and "aggressively grew our cloud and software as a service (‘SaaS’) businesses", stating: "The 'strong growth' in the cloud and SaaS businesses certainly makes sense, because cloud and SaaS are high growth markets. What was left unsaid was that, to date, the growth in cloud and SaaS is off a very small base and it has not offset revenue pressures elsewhere. As BMC was admittedly late to enter some of these markets, we believe it would strongly benefit from our technologically sophisticated nominees who understand the platform transition from on-premise to cloud."
Elliott's letter also cited "a concerning pattern of mismanagement for BMC" adding that "far greater Board focus is required to rectify this situation".
BCM responded with the following statement: "BMC stands by its previous statements, including those made in its letter to Elliott dated May 16, 2012. The BMC Board is focused on creating value for all stockholders through the execution of its differentiated strategy to provide the most comprehensive portfolio of heterogeneous, integrated IT management solutions to enterprises of all sizes around the world."
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