HP-EDS Deal Jars BMC Software

SAN FRANCISCO - BMC Software(BMC Quote) expects to profit from Hewlett-Packard's(HPQ Quote) move into the outsourcing business.

H-P's acquisition of Electronic Data Systems(EDS Quote), announced Tuesday, puts both companies in competition with their traditional business partners.

Like many vendors, BMC is now faced with losing some business to H-P. However, the Houston-based software developer is positioning itself as the neutral middleware developer to which independent integrators can turn instead of H-P.

Following its fourth-quarter outperformance disclosed late Thursday, BMC's stock jumped $2.81, or 7.7%, to $39.24 in early trading Friday, before falling back to $38.74. BMC posted annual revenue of $1.73 billion for the fiscal year just ended.

Both Lehman Brothers and Oppenheimer raised their one-year price targets on BMC Friday to $43 from $40. And Goldman Sachs raised its target to $41 from $37.

"H-P has historically been positioned as an agnostic partner," to a customer's choice of equipment, software or integrator, BMC CEO Bob Beauchamp said in an interview. "With the EDS announcement, they've essentially said 'we don't need any of you.'"

H-P declined comment Friday.

In a horizontal business model, systems integrators such as Accenture(ACN Quote) and EDS typically provide both outsourcing services and system packages consisting of hardware and software from a variety of vendors, including HP.

Although integrators may have preferred-vendor alliances, they typically remain neutral, allowing their clients to specify the hardware and software brands of their choosing.

The exception to this model has been outsourcing and services leader IBM(IBM Quote), which works with competing vendors but has built a successful business model primarily by integrating its own hardware, software and outsourcing services.