Description
Filed with the SEC from May 24 to May 30:
BMC Software (BMC)
Hedge fund Elliott Management disclosed that it now owns 10,396,000 shares (6.5%) after it bought 1,551,000 shares from May 18 through May 25 at prices in a range of $41.71 to $43.47 each.
BUSINESS OVERVIEW
Overview
BMC Software, Inc. (collectively, we, us, our, the Company or BMC) is one of the world’s largest software companies. We provide IT management solutions for large, mid-sized and small enterprises and public sector organizations around the world. Our extensive portfolio of IT management software solutions simplifies and automates the management of IT processes, mainframe, distributed, virtualized and cloud computing environments, as well as applications and databases. We also provide our customers with maintenance and support services for our products and assist customers with software implementation, integration, IT process and organizational transformation, and education services. We were organized as a Texas corporation in 1980 and were reincorporated in Delaware in July 1988. Our principal corporate offices are located at 2101 CityWest Boulevard, Houston, Texas 77042-2827. Our main telephone number is (713) 918-8800, and our primary internet address is http://www.bmc.com. Our internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.
We file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings and all related amendments are available free of charge at http://investors.bmc.com. We post all of our SEC documents to our website as soon as reasonably practical after such material is electronically filed with, or furnished to, the SEC. Our corporate governance guidelines and the charters of the Board of Directors committees are also available at http://www.bmc.com, as is our Professional Conduct Policy and Code of Ethics, as amended from time to time. Printed copies of each of these documents are available to stockholders upon request by contacting our investor relations department at (800) 841-2031 ext. 4525 or via email at investor@bmc.com.
Strategy
Our strategy is to be the leader in providing IT management solutions that simplify and automate complex IT functions and processes in order to improve IT efficiency and value. We believe “Business runs on IT” and that by helping our customers run their IT organizations smarter, faster and more intelligently, their businesses will thrive. Our solutions and services help businesses address key initiatives such as cloud computing, IT service management, proactive operations, data center automation, mainframe cost optimization and IT business management.
Responding to the needs of IT executives to optimize costs, increase business competitive advantage, improve service quality, manage risk and provide greater transparency, we provide solutions that enable Business Service Management (BSM), which we define as a universal platform for simplifying and automating the management of IT. Our BSM approach resonates powerfully with large enterprise customers and results in substantial savings and value created through improved IT operational efficiency, consistent service delivery and the ability to rapidly address changing business needs. We have developed our BSM platform so that it can be deployed at once as a full, comprehensive solution or over time as a series of modules. To accomplish this, we provide integrated products and solutions (see the Solutions and Products section below). Our current BSM offering represents continued innovation from internal development, strategic acquisitions and by partnering with leading technology providers. We are committed to further enhancing our BSM platform in order to help our customers better manage IT complexity across diverse infrastructures and processes. We are also committed to providing customer choice by delivering our products and solutions through a combination of methods, including on-premise delivery and software-as-a-service (SaaS).
At the core of our BSM platform, we provide a family of shared foundational technologies called BMC Atrium that provides the enabling architecture to unify information and processes from disparate management tools and to allow IT teams to focus on delivering business services. One of the key components of BMC Atrium is the BMC Atrium Configuration Management Database (CMDB). The BMC Atrium CMDB is an open-architected, federated, intelligent data repository that simplifies the management of IT configurations and delivers accurate visibility into the dependencies between business services, users and IT infrastructure across cloud, virtual, mainframe and distributed environments. Along with other components of BMC Atrium, the BMC Atrium CMDB enables a Configuration Management System that ensures a consistent approach to managing IT processes such as incident management, problem management, change management, configuration management, asset management and event management.
To help clients, we offer education and consulting services that include both industry best practices and our own best practices and are delivered through a comprehensive methodology that is focused on customer value realization. We provide services that assist our customers in defining, implementing and operating our BSM solutions, including technology, process and organizational assessment, design and transformation services. Our BSM solutions support best practices, including those found in IT Infrastructure Library (ITIL), the most widely adopted IT-related best practices framework, and we provide ITIL education and certification to customers and partners through our professional services organization.
As part of our BSM strategy, we also differentiate our approach by supporting mainframe environments. A substantial portion of the world’s most valuable computer data resides on mainframes. Our ability to integrate the mainframe into BSM offers significant benefits to financial services, telecommunications, transportation and other industries. Mainframes remain important to our larger enterprise customers as they continue to be one of the most cost effective and scalable platforms for IT service delivery.
We continue to expand our offerings to further our vision for Dynamic BSM which enables the on-demand provisioning and management of services using new computing platforms, such as cloud computing, in addition to traditional IT environments. In addition to our own efforts, we are working closely with other leading technology providers in the hardware, networking, managed services and SaaS markets to enable the industry’s most comprehensive and robust Dynamic BSM platform.
With the acquisition of Numara Software Holdings, Inc. (Numara) in February 2012, we are now extending the power and benefits of BSM to mid-sized and small business organizations. Anchored by Numara’s award-winning IT service management and IT asset management solutions, BMC can position our network automation, discovery and dependency mapping, and end user experience management solutions to meet the IT management needs of organizations of this size. Our strategy reflects the belief that one-size IT management offerings do not meet all customer needs, and BMC is committed to providing tailored solutions that address specific market requirements, including the need for ease of use and rapid time to value that is paramount to mid-sized and small business IT organizations.
Solutions and Products
We are organized into two software business segments, Enterprise Service Management (ESM) and Mainframe Service Management (MSM). This structure provides the focus required to align our resources and product development efforts to meet the demands of the markets we serve. Our leadership reviews the results of our business using these segments. For financial information related to these two segments, see Note 13 to the accompanying consolidated financial statements.
Our ESM segment consists of the following solution suites and related professional services:
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BMC ProactiveNet Performance Management — Our solution suite in this area manages IT functions and processes such as availability and performance management, event management, service impact management and capacity optimization and provides proactive analytics to help IT identify issues before end users are affected by performance problems. Our solutions prioritize IT events based on business impact and help determine and initiate corrective actions to quickly restore services to the business. We were one of the first IT management leaders to bring business relevance to IT component events in this important market segment for our business. The end user experience management solution from our April 2011 acquisition of Coradiant Inc. (Coradiant) is included in this solution area.
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BMC BladeLogic Automation — Our solution suite in this area manages IT functions and processes such as provisioning, configuration change and compliance automation for servers, networks, applications and databases. Our solutions help IT manage increasing complexity to support rapidly changing business needs, and include our Cloud Lifecycle Management solutions which are now in use by some of the world’s largest public sector organizations and commercial enterprises, including service providers and telecommunications companies. This market segment continues to attract significant customer interest due to the pervasive need for organizations to automate manually-intensive and time-consuming processes in order to achieve greater operational efficiency. The application release process management technology from our September 2011 acquisition of StreamStep, Inc. (StreamStep) is included in this solution area.
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BMC Remedy IT Service Management, BMC Remedy OnDemand and BMC RemedyForce — Our on-premise and SaaS offerings in this area manage IT functions and processes such as the service desk, incident management, service request management, problem management, asset management, service level management, change and release management and identity management. These solutions, built around BMC’s market-leading Remedy brand and related intellectual property, manage and improve IT service as perceived by business end users. They drive improvements in efficiency through application of best practices (such as ITIL) and drive down costs by helping end users solve their own problems, reducing the number of calls to the service desk and tracking the status of IT requests. In this area, we also offer solutions to manage various business functions in IT such as financial planning and budgeting, demand and resource management, supplier management, service cost management and IT controls. In fiscal 2012, we demonstrated our continued growth as a SaaS solution provider and had more than 300 customers live on our SaaS offerings by March 2012. In addition, the mobile IT management capabilities from our June 2011 acquisition of Aeroprise, Inc. (Aeroprise) are included in this solution area.
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BMC FootPrints and BMC Track-It! — Addressing the IT service management and IT asset management needs of mid-sized and small business organizations, we offer solutions designed specifically to address the functionality, ease of use and rapid time-to-value requirements of these market segments. With a broad range of capabilities comparable to that of our enterprise Remedy offerings, BMC is positioned to provide the broadest range of solutions in this area to help IT organizations evolve their capabilities as they grow in size or complexity. These solutions were added to our portfolio upon our February 2012 acquisition of Numara.
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BMC Atrium — Our BMC Atrium offering provides a family of shared foundational technologies in each of our enterprise solution suites that unifies information and processes from disparate management tools and also discovers, models, visualizes and assigns priorities to business services. It includes our BMC Atrium CMDB, a widely implemented and industry-leading CMDB. Our BMC Atrium offering also includes comprehensive discovery and dependency mapping, process and task workflow orchestration, service level management, dashboard and analytic reporting, and service catalog products and capabilities.
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Our professional services organization consists of a worldwide team of experienced software and education consultants who provide implementation, integration, IT process, organizational design, re-engineering and education services related to our products and the IT functions and processes they help to manage. By easing the implementation of our products, these services help our customers realize value more quickly and sustainably. By improving the overall customer experience, we believe that these services also drive future software license transactions with customers.
Our MSM segment addresses IT requirements for mainframe data and performance management, middleware management and enterprise workload automation. These solutions, many of which are integrated with the BMC Atrium CMDB, help our customers consistently meet service objectives while lowering the cost of mainframe, middleware and workload operations by: (i) increasing the availability of their critical business applications; (ii) reducing their hardware resource requirements; (iii) managing ever increasing data, transaction and task volumes with the same or reduced number of staff; and (iv) mitigating the risk and cost associated with regulatory compliance issues facing mainframe, middleware and workload automation organizations. Our MSM solutions are organized into two areas:
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Data and Performance Management — Our mainframe data and performance management solutions ensure the availability and reliability of the business critical data, applications and systems that support mission critical business processes for many of the largest companies worldwide. These solutions help customers optimize the performance, facilitate the administration and enhance the recoverability of the corporate data housed in IBM ® ’s DB2 ® and IMS™ databases. Our MainView product line delivers business-centric systems management, intelligent optimization and capacity management for an extensive array of mainframe infrastructure components. Our MainView AutoOperator products enable automation of comprehensive monitoring, problem diagnosis and resolution through real-time execution of pre-defined tasks. The MainView architecture facilitates seamless integration of the entire product line for faster problem resolution. Our December 2011 acquisition of I/O Concepts Software Corporation (I/O Concepts) is included in this solution area. BMC Middleware Management helps our customers improve the management of the application middleware layer and related application transactions. Tight integration of these offerings with BMC Atrium ensures the mainframe is managed in accordance with business service priorities.
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Enterprise Workload Automation — Our Control-M product line provides a comprehensive set of features which enable data centers to automate their increasingly complex workloads and mission critical business processes. Our solution orchestrates and optimizes dispersed and disparate management processes across multiple locations, platforms and applications, and provides the facilities to centrally monitor and manage workload elements required to support the batch portion of the organization’s business services across physical, virtual and cloud computing environments. Our Control-M Output Management solution automates the difficult task of managing the life cycle of mainframe output reports with facilities which include report decollation, distribution, bundling, viewing, archival and deletion.
Sales and Marketing
We market and sell our products in most major world markets directly through our sales force and indirectly through channel partners including: distributors, resellers, original equipment manufacturers (OEMs), alliance partners and systems integrators. Our sales force includes an inside sales division which provides a channel for additional sales to existing customers and the expansion of our customer base. We also maintain a sales team with a dedicated focus on mid-sized and small business customers.
International Operations
We are a global company that conducts sales, sales support, professional services, product development and support, marketing and product distribution services from numerous international offices. In addition to our sales offices located in major economic centers around the world, we also conduct development activities in the United States, India and Israel, as well as in small offices in other locations. Our product manufacturing and distribution operations are based in Houston, Texas, and Dublin, Ireland. We plan to continue to look for opportunities to efficiently expand our operations in international locations that offer highly talented resources as a way to maximize our global competitiveness.
Software Licenses
We license our software under both perpetual and term license models for customer on-premise use. Under perpetual license arrangements, our customers receive the perpetual license right to use our software, and related maintenance and support services are generally purchased on an annual basis. Under term license arrangements, our customers receive license rights to use our software along with bundled maintenance and support services for the term of the contract. The majority of our contracts provide customers with the right to use one or more of our products up to a specific license capacity. Capacity can be measured in many ways, including mainframe computing capacity, number of servers, number of users or number of gigabytes, among others. Certain of our enterprise license agreements stipulate that customers can exceed pre-determined base capacity levels, in which case additional fees are specified in the license agreement. Such fees are typically paid on an annual basis in the form of an incremental “true-up” payment. In the absence of such an arrangement, customers are not entitled to exceed the capacity levels in the original license rights.
For qualifying transactions we offer extended payment terms for our solutions under a financing program. We believe that by offering such financing we allow our customers to better manage their IT expenditures and cash flows. Our financing program is discussed in further detail below under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources .
Our license revenue comprised 40.4%, 41.8% and 39.6% of our total revenue in fiscal 2012, 2011 and 2010, respectively. For a discussion of our revenue recognition policies and the impact of our licensing models on revenue, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Revenue Recognition and Note 1 to the accompanying consolidated financial statements.
Maintenance and Support Services
Maintenance and support enrollment entitles software license customers to technical support services, including telephone and internet support and problem resolution services, and the right to receive unspecified product upgrades, maintenance releases and patches released during the term of the support period on a when-and-if-available basis. Maintenance and support service fees are an important source of recurring revenue, and we invest significant resources in providing maintenance and support services. Revenue from maintenance and support services comprised 49.8%, 49.6% and 53.6% of our total revenue in fiscal 2012, 2011 and 2010, respectively.
Software-as-a-Service
We provide on-demand SaaS offerings within our ESM segment. These offerings, the first of which we introduced to the market in late fiscal 2010, provide management solutions through a hosted service rather than a traditional on-premise license model and allow our customers to obtain the benefits of these solutions with reduced infrastructure and setup requirements, leading to faster deployment and lower total cost of ownership. These offerings are sold as either annual or multi-year subscriptions with pricing generally based on the number of users. We also offer customer on-boarding and other related services for these offerings. SaaS subscription revenue is recorded within maintenance revenue in our consolidated financial statements and to date has not represented a significant percentage of our total revenue.
Professional Services
Our professional services group consists of a worldwide team of experienced software and education consultants who provide implementation, integration, IT process, organizational design, re-engineering and education services related to our products. By easing the implementation of our products, these services help our customers accelerate the time-to-value. By improving the overall customer experience, we believe that these services also drive future software license transactions with customers. Revenue from professional services comprised 9.8%, 8.6% and 6.8% of our total revenue in fiscal 2012, 2011 and 2010, respectively.
Research and Development
We conduct research and development activities in various locations throughout the world. During fiscal 2012, 2011 and 2010, we incurred research and development expenses of $165.2 million, $181.6 million and $195.9 million, respectively. These costs relate primarily to personnel and related costs incurred to conduct product development activities. Although we develop many of our products internally, we may acquire technology through business combinations or through licensing from third parties when appropriate. Our expenditures on research and development activities during the last three fiscal years are further discussed under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Research and Development Expenses .
Seasonality
We tend to experience a higher volume of transactions and associated revenue in the quarter ended December 31, which is our third fiscal quarter, and the quarter ended March 31, which is our fourth fiscal quarter, as a result of our customers’ spending patterns and our annual sales quota incentives. As a result of this seasonality for license transactions and timing of related payments, we tend to have greater operating cash flow in our fourth fiscal quarter. However, general economic conditions also have an impact on our business and financial results.
Competition
The enterprise management software business is highly competitive. Both our ESM and MSM businesses compete against a number of enterprises, including large vendors who compete with us at a strategic solution level and across multiple product lines as well as smaller, niche companies who compete against individual products of ours. Our largest competitors are International Business Machines Corporation (IBM), CA, Inc. (CA) and Hewlett-Packard Company (HP). Although we believe we are uniquely positioned to offer integrated BSM solutions to customers, several of our major competitors also market BSM-like solutions and we anticipate continued competition in the BSM marketplace. There are currently between 50 and 100 companies we consider to be directly competitive with one or more of our software solutions. Some of these companies have substantially larger operations than ours in the specific markets in which we compete. With the acquisition of Numara, we now more regularly compete with smaller-sized competitors as well. In addition, the software industry is experiencing continued consolidation which may change both the number of and specific companies with which we compete.
Customers
Our solutions are used by some of the largest, most demanding IT organizations in the world including over 20,000 companies and over 95% of the Forbes Global 100. Our software products are generally used in a broad range of industries, businesses and applications. Our most significant customers include banks and financial service providers, government agencies and other service providers. Our remaining customer base includes manufacturers, telecommunication companies, educational institutions, retailers, distributors, hospitals and other industries, as well as channel partners including resellers, distributors and systems integrators. Our ten largest customers comprised 20% or less of our total revenue in each of fiscal 2012, 2011 and 2010. No single customer accounted for a material portion of our revenue during any of the past three fiscal years.
Intellectual Property
We primarily distribute our products in object code form and rely upon contract, trade secret, copyright and patent laws to protect our intellectual property. The license agreements under which customers use our products restrict the customer’s use to its own operations and prohibit disclosure to third parties. We distribute certain of our products on a shrink-wrap basis and the enforceability of such restrictions in a shrink-wrap license is unproven in certain jurisdictions. Also, notwithstanding these restrictions, it is possible for other persons to obtain copies of our products in object code form. We expect that obtaining such copies would have limited value without access to the product’s source code, which we keep highly confidential. In addition, for certain of our solutions, we employ protective measures such as CPU-dependent passwords, expiring passwords and time-based software trials.
Employees
At March 31, 2012, we had approximately 6,900 full-time employees. We expect that our continued success will depend in part on our ability to attract and retain highly skilled personnel, including technical, sales and management resources.
CEO BACKGROUND
Robert E. Beauchamp. Mr. Beauchamp has served as Chairman of the Board since October 2008 and has served as our President and Chief Executive Officer and a member of the Board since January 2001. He brings to these positions a thorough understanding of our business with experience in key areas, including business strategy, research and development, marketing and sales. Mr. Beauchamp joined us in May 1988, dedicating six years to the sales organization and progressing from senior account representative to sales manager. While in sales he gained a solid understanding of the business issues our customers face on a daily basis. He joined our marketing organization in 1994, becoming Vice President, Strategic Marketing & Development in 1996, and subsequently assumed responsibility for our mergers and acquisitions efforts. Prior to his selection as President and Chief Executive Officer, he further developed his knowledge of our Company and the software business as Senior Vice President of Product Management and Development. Mr. Beauchamp currently serves on the board of National Oilwell Varco, Inc., a public company, and is active in the Houston business community, serving on several civic and not-for-profit boards.
As the Company's Chief Executive Officer for the past 10 years and an employee of the Company with increasing levels of responsibility for over 20 years, Mr. Beauchamp brings to the Board extensive knowledge of the software industry and an in-depth understanding of all aspects of the Company, including its customers, operations, competitive landscape and key business drivers.
Jon E. Barfield. Mr. Barfield has served as our Lead Director since January 2010 and has been a director since 2001. Mr. Barfield has served as the President since 1981 and as Chairman and President since 1995 of the Bartech Group, Inc., a privately held provider of outsourced talent acquisition programs that are effective in managing the procurement and administration of non-employee staff and professional services for regional, national and global corporations. He practiced corporate and securities law at Sidley Austin from 1977 to 1981. Mr. Barfield is a director of CMS Energy Corporation and Motorola Mobility Holdings, Inc., both public companies. Within the past five years, Mr. Barfield also served as a director of the following public companies: Dow Jones & Company, Granite Broadcasting Corp., National City Corporation, and Tecumseh Products Company.
As the Chief Executive Officer of The Bartech Group, Inc., Mr. Barfield brings to the Board a wealth of business management and operational experience. The Board also values and benefits from his significant experience on other public company boards of directors and board committees, including in the areas of legal risk oversight and risk management, financial reporting, human resources, corporate governance, and mergers and acquisitions.
Gary L. Bloom. Mr. Bloom has been a director since 2007. Mr. Bloom has served since March 2010 as Chief Executive Officer of eMeter, Inc., a privately held software company. From December 2009 to March 2010, Mr. Bloom was a business consultant, and from December 2006 to December 2009, Mr. Bloom was a consultant of Texas Pacific Group, a global private investment firm. Mr. Bloom served as Vice Chairman and President of Symantec Corporation from July 2005 to March 2006. Mr. Bloom joined Symantec through its merger with VERITAS Software Corporation, where he served as President and Chief Executive Officer from November 2000 to January 2002, and Chairman, President and Chief Executive Officer from January 2002 to July 2005. Mr. Bloom joined VERITAS after a 14-year career with Oracle Corporation, rising to the rank of Executive Vice President. Mr. Bloom also serves on the board of Taleo Corporation, a public company.
Through his more than 20 years of software company experience, including as a former Chief Executive Officer of a publicly traded software company, and service on other public software company boards, Mr. Bloom brings to the Board extensive knowledge of the software industry and specific insights into the operational and strategic issues facing the Company.
Meldon K. Gafner. Mr. Gafner has been a director since 1987. Mr. Gafner has served since 1998 as the Chief Executive Officer of the Farsight Group, a privately held company that specializes in advanced communications equipment and consulting. He was President, Chief Executive Officer and Chairman of the Board of Comstream Corporation, a privately held manufacturer of high-speed satellite earth stations for data distribution, from July 1988 to July 1997.
As a result of his professional experiences, Mr. Gafner possesses knowledge and experience in management of companies focusing on technology-driven innovation. Mr. Gafner has also served for more than 20 years on the Board affording institutional continuity and industry knowledge accumulated through various industry and economic cycles and through the Company's growth during that period.
Mark J. Hawkins. Mr. Hawkins has been a director since May 2010. Mr. Hawkins has served as Executive Vice President and Chief Financial Officer of Autodesk, Inc. since April 2009. Prior to joining Autodesk, Mr. Hawkins served as Chief Financial Officer and Senior Vice President of Finance and Information Technology at Logitech International S.A. from April 2006 to April 2009. He was employed by Dell Inc. in various finance roles from 2000 to 2006, most recently serving as Vice President of Finance for worldwide procurement and logistics. Prior to joining Dell, Mr. Hawkins was employed by Hewlett-Packard Company for 18 years in finance and business-management roles.
As a chief financial officer of a publicly traded software company, Mr. Hawkins brings to the Board global financial management expertise in the technology industry, including experience in the areas of accounting, capital markets and information technology management.
Stephan A. James. Mr. James has been a director since May 2010. Mr. James is the former Chief Operating Officer of Accenture Ltd., and served as Vice Chairman of Accenture Ltd. from 2001 to 2004. He also served in the advisory position of International Chairman of Accenture from August 2004 to 2006. Mr. James serves as a director of the following public companies: Fidelity National Information Services, Inc. and Navigant Consulting, Inc. Within the past five years, Mr. James also served as a director of the following public companies: CDW Corporation and Metavante Technologies, Inc.
Mr. James brings to the Board valuable and extensive business and strategic experience in the management and operations of a large, complex international technology-based professional services and outsourcing organization. In addition, Mr. James possesses significant public company board experience.
P. Thomas Jenkins. Mr. Jenkins has been a director since 2004. Mr. Jenkins currently serves as Executive Chairman of the Board and Chief Strategy Officer of Open Text Corporation, a publicly traded software company and a leader in providing enterprise content management. Mr. Jenkins was appointed Chief Strategy Officer of Open Text in August 2005. He served as Chief Executive Officer of Open Text from July 1997 to July 2005. From December 1994 to July 1997, Mr. Jenkins held progressive executive positions with Open Text.
Mr. Jenkins brings to the Board a wealth of executive knowledge and extensive business strategy, operational and management experience in the software industry.
Louis J. Lavigne, Jr. Mr. Lavigne has been a director since 2008. Mr. Lavigne is currently a management consultant specializing in the areas of corporate finance, accounting and strategy. Mr. Lavigne retired in March 2005 as Executive Vice President and Chief Financial Officer of Genentech, Inc. He served as Genentech's Chief Financial Officer from 1988 to 2005. Mr. Lavigne became the Controller in May 1983 and an officer of Genentech in February 1984. Mr. Lavigne serves as a director and as Chairperson of the board of Accuray Incorporated and as a director of Allergan, Inc., both public companies. Mr. Lavigne previously served on our Board from October 2004 to February 2007. Within the past five years, Mr. Lavigne also served as a director of the following public companies: Arena Pharmaceuticals, Inc., Equinix, Inc. and Kyphon, Inc. Mr. Lavigne also serves as a trustee of the California Institute of Technology (CalTech) and Babson College.
As a former chief financial officer of a large, complex publicly traded company and a current and former member of numerous public company boards, Mr. Lavigne brings to the Board financial expertise and extensive experience in business operations, strategy, accounting and public company governance.
Kathleen A. O'Neil. Ms. O'Neil has been a director since 2002. She is the President and Chief Executive Officer of Liberty Street Advisors, LLC, a company that she founded in 2001. Liberty Street Advisors, LLC advises public and private companies on corporate governance, risk management, strategy development, infrastructure needs, leadership alignment and execution of change initiatives. Prior to her work at Liberty Street Advisors, Ms. O'Neil was employed at IBM as General Manager of the company's Global Financial Markets Infrastructure Group from January 2001 to September 2001. Prior to joining IBM, Ms. O'Neil served for 24 years at the Federal Reserve Bank of New York in a series of executive roles including Chief Operations Officer, Chief Financial Officer, Chief Administrative Officer and Chief Risk Officer. Ms. O'Neil is a member of the board of directors of Guidance Software, a public company. Ms. O'Neil also serves on the board of trustees of the Motley Fool Funds and is a member of the board of directors of MetLife Bank, N.A., a subsidiary of MetLife, Inc.
As a result of Ms. O'Neil's professional experiences, she provides the Board with financial expertise, experience in risk management, executive managerial experience and extensive knowledge of corporate governance.
Tom C. Tinsley. Mr. Tinsley has been a director since 1997. He is an Advisory Director with General Atlantic Partners, a private equity investment firm. He previously served as a Partner of General Atlantic Partners from 2001 to December 2010 and as a Special Advisor to General Atlantic Partners from 1999 to 2001. Mr. Tinsley joined Baan Company N.V., in November 1995 as President and Chief Operating Officer and served in that position until June 1999. Prior to joining Baan, he was a Director at McKinsey & Company, Inc., where he was employed for eighteen years. Mr. Tinsley serves on the board of Net 1 UEPS Technologies, Inc., a public company. Mr. Tinsley also serves as a director of Critical Path, Inc., a privately held company which was publicly traded within the past five years.
Mr. Tinsley brings to the Board managerial experience in the software industry and, by virtue of his 14 years of service on the Board, extensive knowledge of the Company. The Board also values and benefits from Mr. Tinsley's experience in evaluating, investing in and acquiring technology companies.
MANAGEMENT DISCUSSION FROM LATEST 10K
Overview
Our fiscal 2012 financial performance was solid across most of our core financial metrics. However, year over year ESM license bookings declined and were below our original expectations; refer to the additional discussion regarding ESM license bookings below. Select operating metrics for fiscal 2012 include:
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Total bookings, which represent the contract value of transactions closed and recorded, were $2,196.8 million, essentially flat as compared to fiscal 2011. During fiscal 2012, one large transaction generated total bookings of over $100 million, principally related to our MSM business.
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Total license bookings were $882.4 million, representing a decrease of $44.0 million, or 4.7%, from fiscal 2011. During fiscal 2012, we closed 158 transactions with license values over $1 million (with total license bookings of $480.0 million) compared with 162 transactions with license values over $1 million (with total license bookings of $498.1 million) in fiscal 2011.
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Within our ESM segment, where we evaluate performance on the basis of license bookings, total license bookings decreased by $64.7 million, or 11.3%, from fiscal 2011. We attribute this decrease principally to sales-related factors, including a decline in productive sales capacity caused by sales force attrition as well as a decrease in productivity associated with a reduction in average sales force tenure and experience levels. ESM license bookings in the current year have also been adversely impacted by challenging economic and financial conditions in key geographic areas and market segments, particularly within certain European regions and the U.S. public sector.
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Within our MSM segment, where we evaluate performance based on total and annualized bookings, total bookings for the trailing twelve months ended March 31, 2012 increased by $51.9 million, or 6.2%, and on an annualized basis, after normalizing for contract length, decreased by $27.0 million, or 9.3%, as compared to the prior year period. Over the trailing 36 months ended March 31, 2012, total MSM bookings increased by $156.7 million, or 6.5%, and annualized bookings, after normalizing for contract length, were essentially flat as compared to the prior year period.
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Total revenue was $2,172.0 million, representing an increase of $106.7 million, or 5.2%, over fiscal 2011. This increase was reflective of license, maintenance and professional services revenue increases of $13.3 million, or 1.5%, $56.2 million, or 5.5%, and $37.2 million, or 21.1%, respectively. On a segment basis, total ESM revenue increased by $63.1 million, or 4.9%, and total MSM revenue increased by $43.6 million, or 5.5%, over fiscal 2011.
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Operating income was $543.9 million, representing an increase of $11.1 million, or 2.1%, over fiscal 2011. Non-GAAP operating income was $779.6 million, representing an increase of $46.9 million, or 6.4%, over fiscal 2011.
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Net earnings were $401.0 million, representing a decrease of $55.2 million, or 12.1%, from fiscal 2011. Included in net earnings for fiscal 2012 and 2011 were net tax benefits of $6.2 million and $57.2 million, respectively, associated with tax authority settlements related to prior years’ tax matters which were excluded from our non-GAAP results. Non-GAAP net earnings were $562.1 million, representing an increase of $15.9 million, or 2.9%, over fiscal 2011.
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Diluted earnings per share was $2.32, representing a decrease of $0.18, or 7.2%, from fiscal 2011. Included in diluted earnings per share for fiscal 2012 and 2011 were net tax benefits of $0.04 and $0.31 per share, respectively, associated with tax authority settlements related to prior years’ tax matters which were excluded from our non-GAAP results. Non-GAAP diluted earnings per share was $3.25, representing an increase of $0.26, or 8.7%, over fiscal 2011.
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Cash flows from operations were $800.3 million, representing an increase of $35.1 million, or 4.6%, over fiscal 2011. We closed out the year with a strong balance sheet at March 31, 2012, including $1.6 billion in cash, cash equivalents and investments and $2.0 billion in deferred revenue.
We continue to invest in our technology leadership, including in the areas of cloud computing and SaaS. In addition to our ongoing product development efforts, we consummated multiple strategic acquisitions across both our ESM and MSM segments during fiscal 2012 for aggregate cash consideration of $474.0 million. In our ESM segment, we acquired Coradiant Inc., Aeroprise, Inc., StreamStep, Inc. and Numara Software Holdings, Inc., the latter of which we recently acquired in the fourth quarter and which expands our IT service management solution offerings to small and mid-sized businesses. In our MSM segment, we completed the purchase of Neon Enterprise Software, LLC’s IMS software portfolio and I/O Concepts Software Corporation.
We also continue to enhance shareholder value by returning cash to shareholders through our stock repurchase program. During fiscal 2012, we repurchased approximately 19.2 million shares for a total value of $780.5 million.
Our earnings are subject to volatility as a significant portion of our operating expenses is fixed in the short-term and we plan a portion of our expense run-rate based on our expectations of future revenue. In addition, a significant amount of our license transactions are completed during the final weeks and days of each quarter, and therefore, we generally do not know whether revenue has met our expectations until after the end of the quarter. If a shortfall in revenue were to occur in any given quarter, there would be an immediate, and possibly significant, impact to our overall earnings and, most likely, our stock price.
Because our software solutions are designed for and marketed to companies looking to improve the management of their IT infrastructure and processes, demand for our products, and therefore our financial results, are dependent upon customers continuing to value such solutions and to invest in such technology. There are a number of trends that have historically influenced demand for IT management software, including, among others, business demands placed on IT, computing capacity within IT departments, complexity of IT systems and IT operational costs. Our financial results are also influenced by many economic and industry conditions, including, but not limited to, general economic and market conditions in the United States and other economies in which we market products, changes in foreign currency exchange rates, general levels of customer spending, IT budgets, the competitiveness of the IT management software and solutions industry, the adoption rate for Business Service Management and the stability of the mainframe market.
Acquisitions
We have consummated multiple acquisitions of businesses in recent years. Each of these acquisitions has been accounted for using the acquisition method of accounting. Accordingly, the financial results for these entities have been included in our consolidated financial results since the applicable acquisition dates.
Fiscal 2012 Acquisitions
During fiscal 2012, we completed the acquisitions of Numara Software Holdings, Inc., a provider of integrated IT service management solutions for mid-sized and small companies, for total cash consideration of $305.9 million, and Coradiant Inc., a global provider of end-to-end performance management of web applications, for total cash consideration of $130.0 million. Additionally, we completed the acquisitions of Aeroprise, Inc., a provider of mobile IT service management solutions, Neon Enterprise Software, LLC’s IMS software portfolio, StreamStep, Inc., a provider of application release process management solutions, and I/O Concepts Software Corporation, a provider of mainframe management and security solutions, for combined cash consideration of $38.1 million.
Fiscal 2011 Acquisitions
During fiscal 2011, we completed the acquisition of the software business of Neptuny S.r.l., a provider of continuous capacity optimization software, and the acquisition of GridApp Systems, Inc., a provider of comprehensive database provisioning, patching and administration software, for combined purchase consideration of $51.5 million.
Fiscal 2010 Acquisitions
During fiscal 2010, we completed the acquisitions of MQSoftware, Inc., a provider of middleware and enterprise application transaction management software, Tideway Systems Limited, a provider of IT discovery solutions, and Phurnace Software, Inc., a developer of software that automates the deployment and configuration of business-critical Java™ EE applications, for combined purchase consideration of $94.3 million.
Software License Revenue
License revenue was $877.8 million, $864.5 million and $758.4 million for fiscal 2012, 2011 and 2010, respectively.
License revenue in fiscal 2012 increased by $13.3 million, or 1.5%, over fiscal 2011. This increase was attributable to a license revenue increase in our MSM segment, partially offset by a license revenue decrease in our ESM segment, as further discussed below. Recognition of license revenue in fiscal 2012 that was deferred in prior periods increased by $9.7 million over fiscal 2011. Of the license revenue transactions recorded, the percentage of license revenue recognized upfront increased to 54% for fiscal 2012 as compared to 51% in fiscal 2011.
License revenue in fiscal 2011 increased by $106.1 million, or 14.0%, over fiscal 2010. This increase was attributable to license revenue increases in both our ESM and MSM segments, as further discussed below. Recognition of license revenue in fiscal 2011 that was deferred in prior periods increased by $4.3 million over fiscal 2010. Of the license revenue transactions recorded, the percentage of license revenue recognized upfront increased to 51% for fiscal 2011 as compared to 48% in fiscal 2010.
ESM license revenue was $543.3 million, or 61.9%, $550.9 million, or 63.7%, and $462.2 million, or 60.9%, of our total license revenue for fiscal 2012, 2011 and 2010, respectively. ESM license revenue in fiscal 2012 decreased by $7.6 million, or 1.4%, from fiscal 2011, due to a $13.4 million decrease in the recognition of previously deferred license revenue, partially offset by a $5.8 million increase in the amount of upfront license revenue recognized in connection with new transactions. ESM license revenue in fiscal 2011 increased by $88.7 million, or 19.2%, over fiscal 2010, primarily due to a $77.9 million increase in the amount of upfront license revenue recognized in connection with new transactions and a $10.8 million increase in the recognition of previously deferred license revenue. The increase in upfront license revenue recognized was attributable to an increase in ESM license transaction bookings, due primarily to increased demand for our BSM solutions and increased sales productivity, and a higher percentage of license transaction bookings that were recognized as upfront revenue rather than ratably over the underlying contractual maintenance terms.
Cost of License Revenue
Cost of license revenue consists primarily of the amortization of capitalized software costs for internally developed products, the amortization of acquired technology for products acquired through business combinations, license-based royalties to third parties and production and distribution costs for initial product licenses. For fiscal 2012, 2011 and 2010, cost of license revenue was $158.4 million, or 7.3%, $129.8 million, or 6.3%, and $115.5 million, or 6.0%, of total revenue, respectively, and 18.0%, 15.0% and 15.2% of license revenue, respectively.
Cost of license revenue in fiscal 2012 increased by $28.6 million, or 22.0%, over fiscal 2011. This increase was attributable primarily to an $18.6 million increase in the amortization of capitalized software development costs and a $10.0 million increase in the amortization of acquired technology. The increase in the amortization of capitalized software development costs is related to increases in the amount of costs capitalized in prior periods related to development activities, and represents an increased investment in software development due to the growth of our business.
Cost of license revenue in fiscal 2011 increased by $14.3 million, or 12.4%, over fiscal 2010. This increase was attributable primarily to an $11.9 million increase in the amortization of capitalized software development costs and a $1.7 million increase in the amortization of acquired technology. The increase in the amortization of capitalized software development costs is related to increases in the amount of costs capitalized in prior periods related to development activities, and represents an increased investment in software development due to the growth of our business.
Cost of Maintenance Revenue
Cost of maintenance revenue consists primarily of the costs associated with customer support and research and development personnel that provide maintenance, enhancement and support services to our customers, as well as internal and third party infrastructure hosting and support costs associated with our SaaS offerings. For fiscal 2012, 2011 and 2010, cost of maintenance revenue was $198.5 million, or 9.1%, $169.4 million, or 8.2%, and $158.3 million, or 8.3%, of total revenue, respectively, and 18.4%, 16.5% and 15.5% of maintenance revenue, respectively.
Cost of maintenance revenue in fiscal 2012 increased by $29.1 million, or 17.2%, over fiscal 2011. This increase was attributable to a $7.3 million increase in third party maintenance outsourcing costs, a $5.5 million increase in personnel costs, including third party subcontracting fees, a $5.4 million increase in share-based compensation expense, a $4.3 million increase related to the early exit of a long-term service contract, a $3.5 million increase in third party SaaS hosting and support costs and a $3.1 million net increase in other expenses.
Cost of maintenance revenue in fiscal 2011 increased by $11.1 million, or 7.0%, over fiscal 2010. This increase was attributable to a $6.2 million increase in personnel costs, including third party subcontracting fees, a $1.9 million increase in share-based compensation expense and a $3.0 million net increase in other expenses.
MANAGEMENT DISCUSSION FOR LATEST QUARTER
Overview
For the quarter and nine months ended December 31, 2011, our financial performance was solid across most of our core financial metrics. However, year over year ESM license bookings declined in both the quarter and nine month periods and were below our original expectations; refer to the additional discussion regarding ESM license bookings below. Select operating metrics for the quarter and nine months ended December 31, 2011 include:
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Total bookings, which represent the contract value of new transactions that we closed and recorded, were $524.4 million for the quarter, representing a decrease of $69.7 million, or 11.7%, from the prior year quarter, and for the nine months ended December 31, 2011 were $1,522.2 million, representing an increase of $32.4 million, or 2.2%, over the prior year period. Within the first nine months of fiscal 2012, one large transaction generated total bookings of over $100 million, principally related to our MSM business.
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Total license bookings were $236.8 million for the quarter, representing a decrease of $58.3 million, or 19.8%, from the prior year quarter, and for the nine months ended December 31, 2011 were $616.8 million, representing a decrease of $34.2 million, or 5.3%, from the prior year period. During the quarter, we closed 42 transactions with license bookings over $1 million (with total license bookings of $117.7 million) compared to 44 transactions with license bookings over $1 million (with total license bookings of $153.4 million) in the prior year quarter. During the nine months ended December 31, 2011, we closed 110 transactions with license bookings over $1 million (with total license bookings of $336.2 million) compared to 106 transactions with license bookings over $1 million (with total license bookings of $352.0 million) in the prior year period.
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Within our ESM segment, where we believe performance is best evaluated on the basis of license bookings, total license bookings for the quarter decreased by $37.1 million, or 22.7%, from the prior year quarter, and for the nine months ended December 31, 2011 decreased by $55.9 million, or 13.7%, from the prior year period. We attribute these decreases principally to sales-related execution, including a decline in productive sales capacity caused by sales force attrition as well as a decrease in productivity associated with a reduction in average sales force tenure and experience levels. ESM license bookings in the current year have also been adversely impacted by challenging economic and financial conditions in key geographic areas and market segments, particularly within certain European regions and the U.S. public sector.
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Within our MSM segment, where we believe performance is best evaluated based on total and annualized bookings over a trailing twelve months basis, total bookings for the trailing twelve months ended December 31, 2011 increased by $169.0 million, or 22.2%, and on an annualized basis, after normalizing for contract length, increased by $27.1 million, or 10.2%, as compared to the prior year period.
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Total revenue for the quarter was $548.2 million, representing an increase of $8.3 million, or 1.5%, over the prior year quarter, and for the nine months ended December 31, 2011 was $1,607.3 million, representing an increase of $104.2 million, or 6.9%, over the prior year period. The increase for the quarter was reflective of maintenance and professional services revenue increases of $13.0 million, or 5.0%, and $4.9 million, or 10.7%, respectively, offset by a license revenue decrease of $9.6 million, or 4.1%. The increase for the nine months ended December 31, 2011 was reflective of license, maintenance and professional services revenue increases of $30.3 million, or 4.9%, $41.8 million, or 5.5%, and $32.1 million, or 26.0%, respectively. On a segment basis, total ESM revenue for the quarter decreased by $2.5 million, or 0.7%, and total MSM revenue increased by $10.8 million, or 5.3%, as compared to the prior year quarter, and for the nine months ended December 31, 2011, total ESM revenue increased by $58.0 million, or 6.2%, and total MSM revenue increased by $46.2 million, or 8.1%, over the prior year period.
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Operating income for the quarter was $161.8 million, representing an increase of $22.4 million, or 16.1%, over the prior year quarter, and for the nine months ended December 31, 2011 was $437.9 million, representing an increase of $46.9 million, or 12.0%, over the prior year period. Non-GAAP operating income for the quarter was $212.7 million, representing an increase of $25.2 million, or 13.4%, over the prior year quarter, and for the nine months ended December 31, 2011 was $599.6 million, representing an increase of $63.9 million, or 11.9%, over the prior year period.
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Net earnings for the quarter were $119.9 million, representing an increase of $10.8 million, or 9.9%, over the prior year quarter, and for the nine months ended December 31, 2011 were $330.3 million, representing a decrease of $3.4 million, or 1.0%, from the prior year period. The decrease for the nine months ended December 31, 2011 was due to discrete tax benefits recorded by us in the prior year period in connection with tax authority settlements. Non-GAAP net earnings for the quarter were $156.9 million, representing an increase of $13.7 million, or 9.6%, over the prior year quarter, and for the nine months ended December 31, 2011 were $439.6 million, representing an increase of $34.7 million, or 8.6%, over the prior year period.
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Diluted earnings per share for the quarter was $0.71, representing an increase of $0.11 per share, or 18.3%, over the prior year quarter, and for the nine months ended December 31, 2011 was $1.88, representing an increase of $0.05 per share, or 2.7%, over the prior year period. Non-GAAP diluted earnings per share was $0.93, representing an increase of $0.14 per share, or 17.7%, over the prior year quarter, and for the nine months ended December 31, 2011 was $2.51, representing an increase of $0.29 per share, or 13.1%, over the prior year period.
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Cash flows from operations for the nine months ended December 31, 2011 were $587.4 million, representing an increase of $112.6 million, or 23.7%, over the prior year period. We closed out the quarter with a strong balance sheet at December 31, 2011, including $1.4 billion in cash, cash equivalents and investments and $1.9 billion in deferred revenue.
We continue to invest in our technology leadership, including in the areas of cloud computing and software-as-a-service (SaaS). In addition to our ongoing product development efforts, we consummated several strategic acquisitions across both our ESM and MSM segments during the nine months ended December 31, 2011. In our ESM segment, we acquired Coradiant Inc., Aeroprise, Inc. and StreamStep, Inc. In our MSM segment, we completed the purchase of Neon Enterprise Software, LLC’s IMS software portfolio and I/O Concepts Software Corporation. Additionally, in January 2012, we also announced our pending acquisition of Numara Software Holdings, Inc., a leader in service management solutions for mid-market companies. This acquisition within our ESM segment complements our on-premise and SaaS offerings, expanding our IT management solutions to small and mid-market businesses.
We also continue to enhance shareholder value by returning cash to shareholders through our stock repurchase program. During the quarter and nine months ended December 31, 2011, we repurchased 6.3 million and 15.1 million shares, respectively, for a total value of $225.0 million and $630.5 million, respectively. In October 2011, our Board of Directors authorized an additional $1.0 billion to repurchase stock.
Our earnings are subject to volatility as a significant portion of our operating expenses is fixed in the short-term and we plan a portion of our expense run-rate based on our expectations of future revenue. In addition, a significant amount of our license transactions are completed during the final weeks and days of each quarter and, therefore, we generally do not know whether revenue has met our expectations until after the end of the quarter. If a shortfall in revenue were to occur in any given quarter, there would be an immediate, and possibly significant, impact to our overall earnings and, most likely, our stock price.
Because our software solutions are designed for and marketed to companies looking to improve the management of their IT infrastructure and processes, demand for our products, and therefore our financial results, are dependent upon customers continuing to value such solutions and to invest in such technology. There are a number of trends that have historically influenced demand for IT management software, including, among others, business demands placed on IT, computing capacity within IT departments, complexity of IT systems and IT operational costs. Our financial results are also influenced by many economic and industry conditions, including, but not limited to, general economic and market conditions in the United States and other economies in which we market products, changes in foreign currency exchange rates, general levels of customer spending, IT budgets, the competitiveness of the IT management software and solutions industry, the adoption rate for Business Service Management and the stability of the mainframe market.
Software License Revenue
License revenue for the quarter ended December 31, 2011 was $225.0 million, a decrease of $9.6 million, or 4.1%, from the prior year quarter. This decrease was attributable to a decrease in our ESM segment license revenue, offset by an increase in our MSM segment license revenue, as further discussed below. Recognition of license revenue that was deferred in prior periods decreased S4.6 million for the quarter ended December 31, 2011 as compared to the prior year quarter. Of the license revenue transactions recorded, the percentage of license revenue recognized upfront was 55% in the current quarter as compared to 46% in the prior year quarter.
License revenue for the nine months ended December 31, 2011 was $644.2 million, an increase of $30.3 million, or 4.9%, over the prior year period. This increase was attributable to increases in our ESM and MSM segment license revenues, as further discussed below. Recognition of license revenue that was deferred in prior periods increased $16.2 million for the nine months ended December 31, 2011 as compared to the prior year period. Of the license revenue transactions recorded, the percentage of license revenue recognized upfront was 54% in the current period as compared to 50% in the prior year period.
ESM license revenue was $133.7 million, or 59.4%, and $398.2 million, or 61.8%, of our total license revenue for the quarter and nine months ended December 31, 2011, respectively, and $148.9 million, or 63.5%, and $393.4 million, or 64.1%, of our total license revenue for the quarter and nine months ended December 31, 2010, respectively. ESM license revenue for the quarter ended December 31, 2011 decreased by $15.2 million, or 10.2%, from the prior year quarter, primarily due to a $10.8 million decrease in the recognition of previously deferred license revenue and a $4.4 million reduction in upfront license revenue recognized in connection with new transactions. The decrease in upfront license revenue recognized in the quarter ended December 31, 2011 was attributable to a decrease in license bookings, partially offset by a higher percentage of such bookings that were recognized as revenue upfront rather than ratably over the underlying contractual maintenance terms. ESM license revenue for the nine months ended December 31, 2011 increased by $4.8 million, or 1.2%, over the prior year period, primarily due to an $8.3 million increase in the amount of upfront license revenue recognized in connection with new transactions, offset by a $3.5 million decrease in the recognition of previously deferred license revenue. The increase in upfront license revenue recognized in the nine months ended December 31, 2011 was attributable to a higher percentage of license bookings that were recognized as revenue upfront rather than ratably over the underlying contractual maintenance terms, partially offset by a decrease in license bookings.
MSM license revenue was $91.3 million, or 40.6%, and $246.0 million, or 38.2%, of our total license revenue for the quarter and nine months ended December 31, 2011, respectively, and $85.7 million, or 36.5%, and $220.5 million, or 35.9%, of our total license revenue for the quarter and nine months ended December 31, 2010, respectively. MSM license revenue for the quarter ended December 31, 2011 increased by $5.6 million, or 6.5%, over the prior year quarter. This increase was primarily due to a $6.2 million increase in the recognition of previously deferred license revenue, partially offset by a nominal decrease in the amount of upfront license revenue recognized in connection with new transactions. MSM license revenue for the nine months ended December 31, 2011 increased by $25.5 million, or 11.6%, over the prior year period. This increase was primarily due to a $19.7 million increase in the recognition of previously deferred license revenue and a $5.8 million increase in the amount of upfront license revenue recognized in connection with new transactions. The increase in upfront license revenue recognized in the nine months ended December 31, 2011 was attributable to an increase in license bookings, partially offset by a lower percentage of license bookings that were recognized as revenue upfront rather than ratably over the underlying contractual maintenance terms.
Domestic License Revenue
Domestic license revenue was $107.4 million, or 47.7%, and $314.9 million, or 48.9%, of our total license revenue for the quarter and nine months ended December 31, 2011, respectively, and $105.8 million, or 45.1%, and $291.3 million, or 47.5%, of our total license revenue for the quarter and nine months ended December 31, 2010, respectively. Domestic license revenue for the quarter ended December 31, 2011 increased by $1.6 million, or 1.5%, over the prior year quarter, due to a $1.9 million increase in ESM license revenue, offset by a $0.3 million decrease in MSM license revenue. Domestic license revenue for the nine months ended December 31, 2011 increased by $23.6 million, or 8.1%, over the prior year period, due to a $13.6 million increase in ESM license revenue and a $10.0 million increase in MSM license revenue.
International License Revenue
International license revenue was $117.6 million, or 52.3%, and $329.3 million, or 51.1%, of our total license revenue for the quarter and nine months ended December 31, 2011, respectively, and $128.8 million or 54.9%, and $322.6 million, or 52.5%, of our total license revenue for the quarter and nine months ended December 31, 2010, respectively.
International license revenue for the quarter ended December 31, 2011 decreased by $11.2 million, or 8.7%, from the prior year quarter, due to a $17.1 million decrease in ESM license revenue, offset by a $5.9 million increase in MSM license revenue. The ESM license revenue decrease was attributable primarily to decreases of $11.9 million and $4.6 million in our Europe, Middle East and Africa (EMEA) and Asia Pacific markets, respectively. The MSM license revenue increase was attributable primarily to increases of $4.0 million and $2.3 million in our Latin America and Canada markets, respectively.
International license revenue for the nine months ended December 31, 2011 increased by $6.7 million, or 2.1%, over the prior year period, due to a $15.6 million increase in MSM license revenue, offset by an $8.9 million decrease in ESM license revenue. The MSM license revenue increase was attributable to increases of $10.4 million, $9.9 million and $1.7 million in our Latin America, EMEA and Asia Pacific markets, respectively, offset by a $6.4 million decrease in our Canada market. The ESM license revenue decrease was attributable to decreases of $15.7 million and $2.8 million in our EMEA and Latin America markets, respectively, offset by increases of $6.3 million and $3.3 million in our Asia Pacific and Canada markets, respectively.
Domestic Maintenance Revenue
Domestic maintenance revenue was $144.6 million, or 53.1%, and $432.5 million, or 53.6%, of our total maintenance revenue for the quarter and nine months ended December 31, 2011, respectively, and $139.3 million, or 53.7%, and $416.6 million, or 54.4%, of our total maintenance revenue for the quarter and nine months ended December 31, 2010, respectively. Domestic maintenance revenue for the quarter ended December 31, 2011 increased by $5.3 million, or 3.8%, over the prior year quarter, due to a $3.5 million increase in ESM maintenance revenue and a $1.8 million increase in MSM maintenance revenue. Domestic maintenance revenue for the nine months ended December 31, 2011 increased by $15.9 million, or 3.8%, over the prior year period, due to an $11.5 million increase in ESM maintenance revenue and a $4.4 million increase in MSM maintenance revenue.
International Maintenance Revenue
International maintenance revenue was $127.7 million, or 46.9%, and $374.9 million, or 46.4%, of our total maintenance revenue for the quarter and nine months ended December 31, 2011, respectively, and $120.0 million, or 46.3%, and $349.0 million, or 45.6%, of our total maintenance revenue for the quarter and nine months ended December 31, 2010, respectively.
International maintenance revenue for the quarter ended December 31, 2011 increased by $7.7 million, or 6.4%, over the prior year quarter, due to a $4.2 million increase in ESM maintenance revenue and a $3.5 million increase in MSM maintenance revenue. The ESM maintenance revenue increase was attributable primarily to increases of $2.8 million and $1.4 million in our EMEA and Asia Pacific markets. The MSM maintenance revenue increase was attributable primarily to increases of $2.4 million and $1.2 million in our Latin America and EMEA markets, respectively.
International maintenance revenue for the nine months ended December 31, 2011 increased by $25.9 million, or 7.4%, over the prior year period, due to a $9.6 million increase in ESM maintenance revenue and a $16.3 million increase in MSM maintenance revenue. The ESM maintenance revenue increase was attributable to increases of $4.6 million and $3.2 million in our Asia Pacific and EMEA markets, respectively, and a combined net increase of $1.8 million in our other international markets. The MSM maintenance revenue increase was attributable to increases of $7.9 million and $6.2 million in our Latin America and EMEA markets, respectively, and a combined net increase of $2.2 million in our other international markets.
Professional Services Revenue
Professional services revenue for the quarter ended December 31, 2011 increased by $4.9 million, or 10.7%, over the prior year quarter, which is reflective of a $5.2 million, or 25.4%, increase in domestic professional services revenue, offset by a $0.3 million, or 1.2%, decrease in international professional services revenue. Professional services revenue for the nine months ended December 31, 2011 increased by $32.1 million, or 26.0%, over the prior year period, which is reflective of an $18.7 million, or 32.0%, increase in domestic professional services revenue and a $13.4 million, or 20.6%, increase in international professional services revenue. These increases were attributable primarily to increases in implementation, consulting and education services revenue period over period, including increased demand for cloud implementations.
CONF CALL
Derrick Vializ
Good afternoon, everyone. I'm Derrick Vializ, Vice President of Investor Relations, and I would like to thank you for joining us today.
During our call, Bob Beauchamp, our Chairman and CEO, will provide an overview of the fourth quarter fiscal 2012 performance of both our company and business units and update you on recent initiatives. After that, Steve Solcher, our CFO, will provide additional financial and operational detail. Bob will then discuss and provide our expectations for fiscal 2013 before we open the call to questions.
These prepared comments were previously recorded. This call is being webcast, and a complete record of the call will be made and posted to our website. In addition to today's earnings press release, we have posted a presentation which we will refer to at various times during the call. Both of these documents are available on our Investor Relations website at investors.bmc.com.
Before we continue, I would like to remind you that statements in this discussion, including statements made during the question-and-answer session regarding BMC's future financial and operating results, particularly statements and views regarding fiscal 2013, the development of and demand for BMC's products, BMC's operating strategies, acquisitions and other statements that are not statements of historical fact are considered forward-looking statements. These statements are subject to numerous important factors, risks and uncertainties which could cause actual results to differ from the results implied by these or any other forward-looking statements.
Cautionary statements relative to these forward-looking statements and BMC's operating results are described in today's earnings press release and in our annual report on Form 10-K. All of these documents are available on our website. These forward-looking statements are made as of today based on certain expectations, and we undertake no obligation to update these forward-looking statements.
I would also like to point out that the company's use of non-GAAP financial measures is explained in today's earnings press release, and a full reconciliation between non-GAAP measures and the corresponding GAAP measures is provided in the tables accompanying the press release and at investors.bmc.com.
Now I'll turn the call over to Bob.
Robert E. Beauchamp
Good afternoon, everyone. I'm pleased to report that BMC Software ended fiscal year 2012 on a strong positive note with renewed momentum in several key areas.
During the quarter, we saw our ESM business regain positive momentum. We generated solid sequential growth of 21% in ESM license bookings. We aggressively grew our cloud and Software as a Service, SaaS, businesses with a large number of new wins. Our Numara acquisition is performing above expectations. We expanded key alliances to create go-to-market leverage. We made further progress to improve sales execution, including numerous steps taken to address sales attrition, and our tenured and overall ESM sales force capacity, excluding Numara, is up, finishing the year with 20% more total sales capacity than at the beginning of fiscal 2012.
Our MSM business unit also performed well in the fourth quarter. We grew the run rate of bookings in our top 15 MSM transactions overall, largely due to our success in selling more new products into those relationships. And our Control-M workload scheduling products continue to see healthy growth as a result of our technology leadership in that space.
Our Global Services business also generated strong growth during the quarter. Demand for private and hybrid cloud solutions as well as overall BSM transformational programs remained high, with positive impact on the number and scope of our services engagements. Signing several large long-term services engagements with key customers positions us well entering fiscal 2013, and ongoing efforts to certify consultants and partners with BMC solutions has created a growing overall ecosystem and led to success in a number of high-profile BSM implementations with major customers.
Looking back over the past 12 months, we also worked through our share of challenges. But over the course of the year, we once again delivered growth on several of our key metrics. Revenue rose 5%. Non-GAAP operating margin increased to 36%. Non-GAAP diluted EPS was up 9%, and cash flow from operations grew 5% to $800 million.
During fiscal 2012, we took a number of important steps to strengthen our position in the marketplace, including the significant expansion of our sales force capacity. Overall market conditions plus the progress we made in addressing our fiscal 2012 challenges makes us feel good about our prospects going into fiscal 2013.
At the core of our outlook is what we believe to be a unique and differentiated strategy to build value for customers by providing the most comprehensive, heterogeneous, integrated IT management platform to enterprises of all sizes around the world. Our integrated management platform helps organizations dramatically reduce their IT operating costs while improving their agility and their quality of service.
We believe that successfully delivering on this strategy will drive customer value that leads to better financial performance and total shareholder returns. Customer demand for such a platform is growing across geographic borders and market boundaries. That's because the pressure for IT to deliver improved performance at lower cost for the business has never been greater.
Given this demand, we see great opportunities for our solutions ahead. We see a significant competitive advantage by delivering an IT management platform that manages services that span across physical, virtual and hybrid environments. We see the same type of advantage for our management platform that is capable of integrating a myriad of third-party vendor hardware and software offerings. Today, none of our competitors come close to matching the breadth and depth of the management platforms that BMC offers. That's one major reason why we continue to win a growing number of larger, multi-disciplined ESM wins. The number of multiple disciplined ESM wins over $1 million in license bookings was up over 10% in fiscal 2012 compared to the previous year. It was up over 40% in the past 2 years.
Customers like Frontier Communications, Logic Australia, the U.S. Navy and the Department of Homeland Security selected our integrated IT management solutions as their platform for delivering IT-enabled services required by their businesses.
As we have discussed before, the shift to cloud computing and the added complexity it brings to IT organizations is a major driver for demand for IT management. A recent commissioned research survey conducted by Forrester Consulting on behalf of BMC underscores these trends. It confirms the growing demand for cloud services and also signals the growing tensions between IT and business stakeholders in how they access the cloud. The solution: enterprises need a comprehensive integrated management platform to support any infrastructure in the cloud, now and in the future.
That's exactly what we offer. It's why during fiscal 2012, we saw an increase in the number of cloud wins and cloud-related license bookings. We're proud to say that a wide range of companies are using our cloud management solutions, and we delivered our best quarter ever for cloud solutions.
A couple of outstanding wins include Foxconn, a multinational electronics manufacturing company, and América Móvil, the largest telco service provider in Latin America. América Móvil chose our entire cloud and BSM platform over 2 of our largest competitors.
During fiscal 2012, the number of cloud transactions doubled year-over-year, increasing 130%, and cloud-related license bookings increased 70% in fiscal 2012 versus fiscal 2011.
Software as a Service is another key area of growth for BMC. As you know, we have 2 primary SaaS offerings: BMC's Remedyforce and Remedy OnDemand. Both offerings are accelerating rapidly. For Remedyforce, which is marketed directly and through Salesforce.com, we announced our 100th Remedyforce customer in November after approximately 300 days of product availability. But by the close of fiscal year, we had reached 200 customers.
Throughout fiscal 2012, we saw acceleration in our Remedyforce customer growth, with a number of new customers gained in each quarter increasing sequentially through the year. A large-seat license win for Remedyforce was E*TRADE financial, where we beat out another prominent SaaS vendor to win the deal.
Remedy OnDemand also continues to do well. I want to remind you that the deal sizes for this offering tend to be much greater than for our Remedyforce offering. By the end of the year, we had nearly 100 customers with this offering. In addition, I'm pleased to announce that after 15 years of collaboration, BMC and Capgemini have recently signed a strategic infrastructure services partnership agreement which will provide the majority of Capgemini outsourcing clients in Europe the option to move onto BMC's Remedy OnDemand platform. The agreement, which includes a joint go-to-market strategy, will enable Capgemini to enhance its service management business and positions both companies for significant growth in the service integration marketplace. This partnership positions BMC to be the largest ITSM SaaS vendor in EMEA and to further grow our Remedy OnDemand footprint in the future. It also demonstrates the power and potential of our alliances to expand our reach and footprint.
Over the course of the past year, we have described some of these alliances to you, such as our partnership with VCE, Dell and Cisco, and this will continue to be a key focal point going forward.
Let me next update you on our recent acquisition of Numara. Our integration efforts have been tracking according to plan, and to date, Numara is performing ahead of our expectations. We're very excited about the strategic capabilities Numara has brought to us for multiple reasons.
This acquisition has tripled our install base of active help desk, ITSM and IT asset management customers. Additionally, the Numara acquisition brings an experienced management team and the sales and channel capabilities required to serve the medium-sized enterprise market. This represents a substantial expansion of the opportunities available to us for our ITSM solutions, including our SaaS offerings such as Remedyforce. We're very pleased with our early progress with Numara.
Next let's discuss our MSM business, which enjoyed a very solid fiscal 2012. MSM bookings overall rose 6% year-over-year. As noted, we continued to see growth in the annual spin rate of our top 15 MSM transactions in the fourth quarter. During the year, we added or expanded our relationships with new and existing customers with approximately 550 new product placements for MSM.
In the fourth quarter, we expanded our relationship with customers like El Corte Inglés and Westpac Banking. We also saw strength in workload automation, which includes our BMC Control-M product line. Enterprise workload automation represents over 1/3 of our MSM business.
For the year, we added 88 new BMC Control-M customers, often displacing competitors, and expanded our existing relationship with over 300 new product placements. Some key workload automation wins in the fourth quarter included Capital One, Fujitsu Management Systems and Deutsche Börse.
The mainframe business offers a very good opportunity for us. Our ability to capitalize on these opportunities is reflected in the customer surveys we regularly conduct. Customer satisfaction with BMC solutions is at a record high level. We intend to leverage our strong brand to generate further success in this space.
We're also very pleased with the success of our Global Services business. For the quarter, Services revenue grew 10% year-over-year, and for all of fiscal 2012, it was up 21% compared to fiscal 2011. We successfully delivered a number of high-profile BSM implementations over the past year and began many more. Many of our customers tell us that their BSM programs are critical to the future of their business, and they are increasingly looking to BMC for strategic advice on managing change and implementing best practices.
To respond, we have placed an increasing emphasis on architectural consulting, customer education and global program management within our services organization. This has the added benefit of driving earlier customer value realization for BSM projects, which in turn leads to more rapid follow-on purchases for both software and services. We also continue to train and certify partners wherever possible to grow the ecosystem of companies focused on BMC solutions.
So that gives you a snapshot of our strategy and performance during the fourth quarter and the fiscal year. It was a year during which we built a stronger foundation for the opportunities that lie ahead. We stayed focused on our strategy and our vision, which continued to set us apart in the IT management marketplace. We enhanced our technology leadership in BSM, including the acquisition of Numara, which tripled our install base of active help desk, ITSM and IT asset management customers.
We work to strengthen our distribution and direct sales team and ended fiscal 2012 with 20% more total ESM sales capacity, excluding Numara, than when we entered it. The progress here is evidence of our efforts to address our well-documented fiscal 2012 challenges to improve sales force capacity and productivity, and it puts us in a much-improved position as we enter fiscal 2013.
Through our new and expanded initiatives and alliances with partners including Capgemini, Dell, VCE, Cisco and Salesforce.com, we are able to reach more customers with more solutions than ever before. We are gaining recognition as the IT management platform of choice for enterprises around the world with a number of multi-disciplined ESM deals over $1 million in license bookings, up over 10% in fiscal 2012.
We are broadening the capabilities of our cloud and SaaS solutions and are gaining scale in their adoptions with new cloud wins nearly doubling year-over-year, and we now have over 300 SaaS customers.
Our MSM business remains the leader in its market, including over 300 new product placements for our Control-M solution, and our Global Services business continues to grow its capabilities with 21% revenue growth in fiscal 2012. All of this paves the way for a solid fiscal 2013.
I'll come back and discuss our outlook with you after Steve reviews the quarter and year in more detail. Steve?
Stephen B. Solcher
Thank you, Bob. I would like to start by adding to Bob's comments about our performance for the quarter and the fiscal year.
I am pleased with how we finished the fiscal year across several of our key financial metrics as well as the overall performance across our businesses. Despite the challenges we faced throughout the fiscal year, we grew non-GAAP operating income for the year by 6%, non-GAAP diluted earnings per share by 9% and cash flow from operations by 5%.
During the fourth quarter, we showed strong sequential improvement in our leading indicators as we grew total bookings 29% and ESM license bookings 21%.
In the fast-growing markets of cloud and SaaS, we saw strong momentum. In the fourth quarter, our SaaS bookings nearly tripled and our cloud-related license bookings nearly doubled on a year-over-year basis.
Our MSM business had another strong quarter and finished fiscal 2012 with solid bookings growth of 6% with numerous new product and customer wins.
Our Global Services business posted another profitable quarter and grew revenue by 21% for the full year. The improvement and momentum we demonstrated in the fourth quarter bodes well for us as we enter 2013.
With that, let me review our financial results for the fourth quarter and full fiscal year in more detail.
Non-GAAP operating income was $180 million, down 9% from the fourth quarter of last year. Our fourth quarter non-GAAP operating margin was 32%, down 3 points from the year-ago quarter. For the full year, we achieved non-GAAP operating income of $780 million, an increase of 6% over the prior year. Non-GAAP operating margin for fiscal 2012 was 36%, up 1 point from fiscal 2011.
Please refer to Slide 5 in our presentation for selected non-GAAP financial information, which includes segmented reporting of our ESM and MSM business units.
ESM's non-GAAP operating income in the fourth quarter declined to $58 million, down 14% from the year-ago period. ESM's non-GAAP operating margin decreased year-over-year by 3 percentage points to 16%.
For the fiscal year, ESM's non-GAAP operating income increased 1% to $282 million. ESM's non-GAAP operating margin decreased by 1 percentage point in fiscal 2012 to 21%.
MSM's non-GAAP operating income in the fourth quarter was $122 million, down 6% from the year-ago period, and its non-GAAP operating margin decreased 3 percentage points to 58%.
For the fiscal year, MSM's non-GAAP operating income was $497 million, up 10%, and it's non-GAAP operating margin was 60%, up 2 percentage points compared to the year ago.
Our non-GAAP net earnings for the fourth quarter were $123 million, down 13% from the fourth quarter fiscal 2011. Non-GAAP diluted earnings per share for the quarter was $0.74 per share. This reflects a non-GAAP effective tax rate for the quarter of 30%.
For fiscal 2012, non-GAAP net earnings were $562 million, an increase of 3% compared to fiscal 2011. Non-GAAP diluted earnings per share for the year was $3.25 per share, up 9% compared to the prior year. This reflects a non-GAAP effective tax rate for fiscal 2012 of 26.6%.
This higher-than-expected tax rate negatively impacted non-GAAP diluted earnings per share for both the fourth quarter and fiscal 2012 by $0.03.
GAAP operating income in the fourth quarter was $106 million, a decline of 25% from the fourth quarter of fiscal 2011. GAAP net earnings and diluted earnings per share were $71 million and $0.43, down 42% and 36%, respectively, from the year-ago quarter.
GAAP operating income in fiscal 2012 was $544 million, an increase of 2% from fiscal 2011. GAAP net earnings and diluted earnings per share for the fiscal year were $401 million and $2.32 per diluted share, down 12% and 7%, respectively, from fiscal 2011. GAAP net earnings in both fiscal 2012 and 2011 were positively impacted by the net income tax benefits of $6 million and $57 million, respectively, associated with tax authority settlements related to prior year's tax matters. These benefits are excluded from our non-GAAP results.
Our non-GAAP results reflect diluted shares outstanding in the fourth quarter of $166 million and for the full fiscal year, $173 million versus $182 million in both respective prior-year periods.
Turning now to bookings. Total bookings for the fourth quarter were $675 million, representing a decrease of 5% compared to the year-ago period. On a constant currency basis, fourth quarter bookings declined 3%. Total bookings for fiscal 2012 were $2.2 billion, flat as reported and on a constant currency basis compared to fiscal 2011.
The weighted average contract length for total bookings on a trailing 12-month basis was 2.39 years, up 10% from the year-ago period. After normalizing for contract length, trailing 12-month annualized bookings for the fourth quarter were $920 million, down 9% from the year-ago period. Please refer to Slide 7 in our presentation.
Now let me turn to the performance of each of our business units. Total ESM license bookings were $153 million in the fourth quarter, down 5% from the year-ago period but up 21% sequentially. For the fourth quarter, Numara contributed almost 4 points of growth to ESM license bookings.
Our SaaS business is best measured on monthly recurring revenue or MRR and on a total bookings basis. MRR represents the combined monthly value of subscription fees associated with our active customers. As of March 31, our SaaS MRR totaled $1.7 million, a 350% increase compared to a year ago, and total bookings for the year grew almost 250% to $26 million. SaaS subscription revenue is reflected within maintenance revenue in our income statement.
We continue to be pleased with the progress of our SaaS business and now have over 300 customers, with over 200 on Remedyforce. For fiscal 2012, total ESM license bookings were $506 million, down 11% from fiscal 2011.
Turning to the MSM business unit. Total MSM bookings for fiscal 2012 increased 6% to $895 million and had an average contract length of 3.4 years. After normalizing for contract length, total annualized MSM bookings for the trailing 12 months were $263 million, down 9%.
In fiscal 2013, we expect annualized bookings for the trailing 12 months to be up in the low double-digits. Since the timing of large transactions can impact bookings quarterly or annually, we also review the performance over a 3-year period, which is in line with our typical contract length. Over the trailing 36-month period, MSM bookings increased by 6% and annualized bookings were flat.
Turning to revenue. Total revenue for the quarter was $565 million, flat as reported and up 1% on a constant currency basis compared to the fourth quarter of fiscal 2011. ESM total revenue was up 1% to $354 million, and MSM total revenue for the quarter decreased 1% to $211 million.
Total revenue for the year was $2.2 billion, increasing 5% as reported and on a constant currency basis. ESM and MSM total revenue for the year increased 5% and 6%, respectively, compared to fiscal 2011.
License revenue in the fourth quarter was $234 million, down 7% from a year ago. ESM license revenue was $145 million, down 8%, while MSM license revenue was $89 million, down 5% from last year. For fiscal 2012, license revenue rose 2% to $878 million.
For the fourth quarter, maintenance revenue was $273 million, an increase of 6% compared to a year ago. ESM maintenance revenue was $151 million, up 9%, and MSM maintenance revenue was $123 million, up 2% compared to the fourth quarter fiscal 2011.
For fiscal 2012, maintenance revenue was up 5% to $1.1 billion. Professional services revenue, which is included in our ESM segment, grew 10% from the year-ago period to $58 million in the fourth quarter. Professional services revenue in fiscal 2012 increased by 21% to $214 million.
Moving next to operating expenses. Non-GAAP operating expenses in the fourth quarter were $385 million, up 5% from the year-ago period. Non-GAAP operating expenses for the year were up 4% from the previous year.
Looking at our business units. ESM's non-GAAP operating expenses for the fourth quarter were $296 million, up 5% from the year-ago period. The increase in ESM's non-GAAP operating expenses is primarily attributable to the inclusion of Numara for a partial quarter.
MSM's non-GAAP operating expenses were $89 million, up 6% from the year-ago period. For fiscal 2012, ESM's non-GAAP operating expenses were $1.1 billion, a 6% increase compared to fiscal 2011. MSM's non-GAAP operating expenses were $333 million, flat compared to the previous year.
Other income in the fourth quarter was a loss of $4 million. For the full fiscal year, other income was a loss of $14 million.
Now turning to the balance sheet. Total deferred license revenue at the end of the fourth quarter was $691 million, up 5% sequentially and 1% year-over-year. During the quarter, we deferred $129 million of license revenue or 48% of license bookings and recorded $98 million of deferred license revenue from the balance sheet. Total deferred revenue increased by $124 million sequentially to $2 billion. The current portion of deferred revenue now stands at 53%.
Software development costs as of March 31 were $245 million, as we capitalized $38 million and amortized $24 million during the quarter. For the fiscal year, we capitalized $145 million of software development cost and amortized $94 million.
Cash and investments total $1.6 billion with 40% of our cash held domestically. Our net cash position was $793 million at March 31.
In February of this year, we issued $500 million of debt securities in the public market with a 10-year maturity and 4.25% coupon. We intend to use the net proceeds from this offering for general corporate purposes, which may include share repurchases and acquisitions.
For the quarter, cash flow from operations was $213 million. For fiscal 2012, cash flow from operations was a company record, $800 million, up 5% from the prior year. During the fourth quarter, we repurchased 4.1 million shares of our stock for a total cost of $150 million. For fiscal 2012, we repurchased 19.2 million shares at a cost of $781 million. We have $850 million remaining in our current share repurchase program as of March 31.
In summary, I'm pleased with the progress and improvements we made in the fourth quarter. We are focused on building on this recent momentum in fiscal 2013 as we continue to invest in high-growth opportunities such as cloud and SaaS. We remain committed to enhancing shareholder value through our capital structure and aggressively returning cash to shareholders via our stock buyback program. We remain disciplined around our acquisition strategy, as demonstrated with our recent acquisition of Numara.
With that, I'll turn the call back over to Bob for his concluding remarks and expectations for fiscal 2013.
Robert E. Beauchamp
Let me provide you with our current expectations for fiscal 2013.
We expect non-GAAP diluted earnings per share in the range of $3.49 to $3.59 per share. At the midpoint, this would represent a 9% increase over fiscal 2012. This range excludes an estimated $1.07 to $1.12 per share for non-GAAP adjustments, including expenses related to the amortization of intangible assets, stock-based compensation and severance, exit costs and related charges.
The assumptions underlying our full year fiscal 2013 expectations include: total bookings growth in the mid- to high single-digits; ESM license booking growth in the low double-digits; MSM total bookings flat compared to the previous year with annualized bookings growth in the low double-digits; revenue growth in the mid- to high single-digits; non-GAAP operating margin slightly lower than the prior year; currency impact at today's rates; other income at a loss of around $30 million, which incorporates our recent $500 million debt issuance; weighted shares outstanding down approximately 5% from the prior year; and a non-GAAP tax rate of 26.5%, flat compared to 2012.
We expect full year fiscal 2013 cash flow from operations to be between $800 million and $850 million, which represents a 3% improvement over fiscal 2012 at the midpoint.
With that, we will now turn the call over to questions. Operator?
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