Compuware (CPWR)

Q3 2012 Earnings Call

January 26, 2012 5:00 pm ET


Lisa Elkin -

Laura L. Fournier - Chief Financial Officer, Chief Accounting Officer, Executive Vice President and Treasurer

Joseph Angileri - President and Chief Operating Officer

Robert C. Paul - Chief Executive Officer and Director


Stewart Materne - Evercore Partners Inc., Research Division

Gary Spivak - Noble Financial Group, Inc., Research Division

Mike Latimore - Northland Securities Inc., Research Division

Aaron Schwartz - Jefferies & Company, Inc., Research Division



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» Compuware Corporation - Analyst/Investor Day
» Compuware's CEO Discusses Q2 2012 Results - Earnings Call Transcript
» Compuware's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Hello, and welcome to the Compuware Corporation's Third Quarter Results Teleconference. At the request of Compuware, this conference is being recorded for instant replay purposes. At this time, I'd like to turn the conference over to Ms. Lisa Elkin, Vice President of Communications and Investor Relations for Compuware Corporation. Ms. Elkin, you may begin.

Lisa Elkin

Thank you very much, Carey, and good afternoon, ladies and gentlemen. With me this afternoon are Bob Paul, Chief Executive Officer; Joe Angileri, President and Chief Operating Officer; and Laura Fournier, Executive Vice President and Chief Financial Officer.

Certain statements made during this conference call that are not historical facts, including those regarding the company's future plans, objectives and expected performance, are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements represent our outlook only as of the date of this conference call. While we believe any forward-looking statements we have made are reasonable, actual results could differ materially since the statements are based on our current expectations and are subject to risks and uncertainties. These risks and uncertainties are discussed in the company's reports filed with the Securities and Exchange Commission. You should refer to and consider these factors when relying on such forward-looking information. The company does not undertake and expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

I will now turn the call over to Bob, who will provide a summary of the quarter's results. Joe will then highlight business unit operating results, followed by Laura, who will close the key -- with key financial information. We will then open the call to your questions.


Robert C. Paul

Thanks, Lisa. The sole focus of tonight's call is to give our investors a clear and transparent understanding of Compuware's current business conditions and future expectations.

To begin, I will provide an overview of the progress of our business units. As we discussed last week, our total APM revenues increased 16% sequentially and 16% year-over-year in Q3. This is healthy growth but simply not as much as we expected.

Last quarter, we talked about a number of changes Compuware made to its APM organization. These changes, including multiple levels of leadership and process change, give us more focus around our individual solutions. This is already positively impacting our APM business where we will see steady improvement of our growth rates.

For Q3, our APM guidance was based upon a solid sales pipeline and commit. Up to the last few days in the quarter, we had enough committed to the sales activity to achieve our APM expectations. This end-of-quarter drop highlights a number of key opportunities for improvement. Our APM number is getting very close to forecast in all geographies other than Asia. This area remains an important emerging market for us. We will continue to invest here, but we will be more cautious and disciplined in understanding the makeup of our sales commit. We have also made changes in our Asia leadership.

Ultimately, we must improve our forecasting discipline and accountability. Following sales leadership meetings last week, this discipline has been refined and reinforced, which should improve the accuracy of our business outlook. One of the many changes we've implemented is to subdue the potential impact of our larger deals in the forecast. This means that if large deals push, we will have an opportunity to make up for them with other wins.

Another priority is stepping up our sales productivity. The team is working on a number of initiatives with particular focus on knowledge and enabling programs to help differentiate between our specific APM solutions. Each of our APM solutions, the Gomez SaaS, dynaTrace and on-prem presents best-in-class solutions for highly related but functionality different problems.

With growth opportunities in each category, a focused solution-specific sales team is a requirement for leveraging our competitive strengths today. And each of the APM solutions has an important role in our vision for a disruptive and seamless value proposition for managing performance from the end-user to the data center. We face no macro impediments to our APM success. For example, we've achieved consistent growth in partnered business from all geographies. More than half of the top 50 are under contract for our APM solutions, and global partners like Cisco and BT continue to contribute meaningfully to our results.

We've seen a modest increase in customer signature requirements, which is a slightly lengthened sale cycle. The competitive environment remains the same, but Compuware is the recognized leader for both current and next-generation APM.

So with the right structure, process and a sales toolkit in place and with no major macro headwinds, the key remaining driver of our AMP success is more activity, more pipelines and more diligence around closing. These are straightforward execution issues, and we've empowered our new APM leadership team to attack them.

In Q3, we introduced John Van Siclen as the new head of our APM business unit. John and our new worldwide leader for APM sales, Eric Fischer, are passionately focused on sales discipline, cost optimization and customer value. We believe that under their leadership, our Q4 year-over-year revenue in APM will grow from 20% to 25%.

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