BMC Software Reports Increases in Third Quarter Earnings and Revenues

HOUSTON - (January 23, 2003) - BMC Software, Inc. [NYSE: BMC], today announced financial results for its third quarter of fiscal 2003, ended December 31, 2002.

BMC Software's net earnings excluding special items for the third quarter of fiscal 2003 were $34.6 million, and diluted earnings per share on this basis were $0.15, an increase of $0.07 cents compared to the third quarter of fiscal 2002. This exceeds the $0.07 to $0.10 range the company provided in November and is $0.06 higher than the current analyst consensus estimate of $0.09. Reflecting special items, net earnings and diluted earnings per share on a GAAP basis were $12.1 million and $0.05, respectively, in the third fiscal quarter which compares to a net loss and loss per share of $94.5 million and $0.39, respectively, in the third quarter of fiscal 2002. Included in the financial tables is a reconciliation of results excluding special items and GAAP results.

"In what remains a challenging IT spending environment, Q3 was a good quarter for BMC as we exceeded our EPS estimate, grew total revenues and license revenues and completed our acquisition of Remedy," said Bob Beauchamp, president and CEO of BMC Software. "I am pleased with the recent improvement in our PATROL^® business and the initial performance we are seeing with our new agentless monitoring solution, PATROL Express. Our results demonstrate that we are gaining traction in the distributed database market with our new SmartDBA™ offerings and our comprehensive strategy that spans all database platforms."

Total revenues in the third fiscal quarter were $349.6 million, an increase of 9 percent over the same quarter of fiscal 2002. Total license revenues in the quarter increased to $168.5 million, up 11 percent, compared to the third quarter of fiscal 2002. Maintenance revenues increased to $159.1 million, up 9 percent, compared to the same quarter of fiscal 2002. Professional services revenues were $22.0 million, a decrease of 2 percent compared to the same quarter last year.

Operating expenses, excluding special items, were $313.3 million, compared to $305.7 million in the same quarter of fiscal 2002.

Total Remedy results, included in BMC Software's third quarter results, reflected revenues of $25.0 million and expenses of $15.3 million, excluding amortization of intangibles, for the six-week post-acquisition period that began on November 21, 2002.

Cash flow from operations in the third fiscal quarter of 2003 was $48.0 million. Cash and marketable securities at December 31 were approximately $900 million. The company continues to have no debt.

The company has continued its Board authorized stock repurchase program that began in April 2000 by spending $40 million to repurchase 2.3 million shares during the third fiscal quarter. Approximately $530 million remains in this program.

Third Quarter Fiscal 2003 Financial Highlights

• Diluted earnings per share excluding special items of $0.15 exceeds the company's estimate of $0.07 to $0.10 and is $0.06 higher than the current analyst consensus estimate of $0.09.
• Total revenues, excluding Remedy, increased 1 percent year-over-year and 11 percent compared to Q2.
• License revenues, excluding Remedy, increased 1 percent year-over-year and 27 percent compared to Q2.
• PATROL license revenues grew 53 percent compared to Q2.
• Cash and marketable securities balance of approximately $900 million.
• Company record for total deferred revenues of approximately $1.1 billion.
• Company record for deferred license revenues of over $224 million.
• Cash flow from operations of $380 million in the first nine months of fiscal year 2003.

Additional Third Quarter Highlights

• Announced completion of its acquisition of the Remedy business from Peregrine Systems for $355 million in cash.
  • Remedy brings to BMC Software service management solutions currently employed by more than 6,000 Remedy customers worldwide, with more than 10 million users.
  • The acquisition price was less than 1.5 times trailing twelve months revenues, with attractive operating margins and positive cash flows.
• Successfully delivered the final component of PATROL 7, the Distribution Server, in December. The Distribution Server offers a solution for customers to centrally manage the deployment and installation of BMC Software distributed systems products in their environment.
• Announced its global enterprise data management blueprint named Project Golden Gate.
  • The goal of Project Golden Gate is to provide deeper levels of interoperability and integration between management tools for mainframe and distributed database management systems (DBMS) by bridging them with the SmartDBA™ console and technologies.
  • BMC Software's unique strategy includes a three-pronged approach, which focuses on the company's core management competencies: built-in intelligence, application centricity and cross database management.
• Announced a global enterprise agreement in which Dell plans to standardize on and internally deploy BMC Software enterprise management solutions.
  • Under terms of the global agreement, Dell is licensed to deploy multiple BMC Software enterprise management solutions that will effectively monitor and manage the strength of Dell's worldwide enterprise information technology infrastructure.
• Announced that Kathleen O'Neil joined the BMC Software Board of Directors.
  • Ms. O'Neil founded Liberty Street Advisors in 2001, which offers public and private companies around the world insights on corporate governance, risk management, strategy development, infrastructure needs, leadership alignment and execution of change initiatives.
  • Prior to founding Liberty Street Advisors, Ms. O'Neil was the general manager of IBM's global financial markets infrastructure group.
  • Before joining IBM, Ms. O'Neil worked at the Federal Reserve Bank of New York for 24 years and held numerous executive level positions during her tenure there, finishing as executive vice president and advisor to the president where she advised the bank's president on policy, strategy and management issues.

Outlook
The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially.

BMC Software expects fourth quarter fiscal 2003 revenues to be in the range of $374 million to $387 million and fourth quarter expenses, excluding special items, to be in the range of $340 million to $350 million. Earnings per share excluding special items in the fourth quarter are expected to be in the range of $0.15 to $0.18. BMC Software expects fiscal 2003 diluted earnings per share, excluding special items, in the range of $0.46 to $0.49, compared to the company's previous estimate of $0.32 to $0.39. The only difference between the fourth quarter earnings estimates excluding special items and GAAP earnings estimates is approximately $24 million of acquisition amortization of intangibles.

BMC Software maintains its fiscal 2003 gross deferred revenue expectation of $130 million to $145 million and its net deferred license revenue expectation for fiscal 2003 in the range of $80 million to $100 million. The company maintains its expectation for fiscal 2003 cash flow from operations of approximately $500 million.

A conference call to discuss third quarter results is scheduled for today at 11:00 a.m. CST. Those interested in participating may call (719) 457-2657 and use the passcode BMC. To access a replay of the conference call, which will be available for one week, dial (719) 457-0820 and use the passcode BMC. A live webcast of the conference call and presentation will be available on the company's website at www.bmc.com/investors. A replay of the webcast will be available within 24 hours and archived on the website for 90 days.

About BMC Software
BMC Software, Inc. [NYSE:BMC], is a leader in enterprise management. The company focuses on Assuring Business Availability^® for its customers by helping them proactively improve service, reduce costs and increase value to their business. BMC Software solutions span enterprise systems, applications and databases. Founded in 1980, BMC Software has offices worldwide and is a member of the S&P 500, with fiscal year 2002 revenues of approximately $1.3 billion. Visit www.bmc.com to learn more.

This news release contains both historical information and forward-looking information. Statements of plans, objectives, strategies and expectations for future operations and results, identified by words such as "believe," "anticipate" and "expect" are forward-looking statements. Numerous important factors affect BMC Software's operating results and could cause BMC Software's actual results to differ materially from the results indicated by this press release or by any other forward-looking statements made by, or on behalf of, BMC Software, and there can be no assurance that future results will meet expectations, estimates or projections. These factors include, but are not limited to, the following: 1) uncertainty regarding future economic conditions worldwide may continue to affect the overall demand for software and services and any worsening of significant economies could result in decreased revenues or lower revenue growth rates; 2) BMC Software's revenues and earnings are subject to a number of factors, including the significant percentage of quarterly sales typically closed at the end of each quarter, that make estimation of operating results prior to the end of a quarter extremely uncertain; 3) BMC Software's operating costs and expenses are relatively fixed over the short term; 4) increased competition and pricing pressures could adversely affect BMC Software's earnings; 5) growth in BMC Software's mainframe revenues is dependent on continued demand for significant additional mainframe MIPS capacity; 6) BMC Software's maintenance revenue could decline if maintenance renewal rates decline or if license revenues do not continue to grow; 7) new software products and product strategies may not be timely introduced or successfully adopted; 8) BMC Software's cash flow from operations is and has been volatile and is dependent upon a number of factors described in BMC Software's filings with the SEC; 9) the additional risks and important factors described in BMC Software's quarterly reports on Form 10-Q and in its Annual Report to Stockholders on Form 10-K for the fiscal year ended March 31, 2002 and other filings with the SEC. BMC Software undertakes no obligation to update information contained in this release.

Investor Relations Contact:
Neil Yekell
(713) 918-4233
neil_yekell@bmc.com

Media Relations Contact:
Eric Krueger
(713) 918-2153
eric_krueger@bmc.com

BMC Software, the BMC Software logos, and all other BMC Software product or service names are registered trademarks or trademarks of BMC Software, Inc. All other trademarks or registered trademarks belong to their respective companies. © 2003, BMC Software, Inc. All rights reserved.