Elliott Associates DFAN14A Additional proxy materials by non-management

Elliott Management‘s Perspectives on BMC

Exhibit  1

May 31, 2012

[

1 ]

Additional Information

Elliott Associates, L.P. and Elliott International, L.P. (“Elliott”) intend to make a filing with the Securities and Exchange Commission of a definitive

proxy statement and an accompanying proxy card to be used to solicit proxies in connection with the 2012 Annual Meeting of Stockholders

(including any adjournments or postponements thereof or any special meeting that may be called in lieu thereof) (the “2012 Annual Meeting”) of

BMC Software, Inc. (the “Company”). Information relating to the participants in such proxy solicitation has been included in a preliminary proxy

statement filed on May 25, 2012, by Elliott with the Securities and Exchange Commission.  Stockholders are advised to read the definitive proxy

statement and other documents related to the solicitation of stockholders of the Company for use at the 2012 Annual Meeting when they become

available because they will contain important information, including additional information relating to the participants in such proxy solicitation.

When completed and available, Elliott's definitive proxy statement and a form of proxy will be mailed to stockholders of the Company. These

materials and other materials filed by Elliott in connection with the solicitation of proxies will be available at no charge at the Securities and

Exchange Commission's website at www.sec.gov. The definitive proxy statement (when available) and other relevant documents filed by Elliott with

the Securities and Exchange Commission will also be available, without charge, by directing a request by mail or telephone to MacKenzie Partners,

Inc., 105 Madison Avenue, New York, New York 10016 (call collect: 212-929-5500; call toll free: 800-322-2885).

Cautionary Statement Regarding Forward-Looking Statements

This proxy statement contains “forward-looking statements.” Specific forward-looking statements can be identified by the fact that they do not relate

strictly to historical or current facts and include, without limitation, words such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,”

“estimates,” “projects,” “targets,” “forecasts,” “seeks,” “could” or the negative of such terms or other variations on such terms or comparable

terminology. Similarly, statements that describe our objectives, plans or goals are forward-looking. Our forward-looking statements are based on our

current intent, belief, expectations, estimates and projections regarding the Company and projections regarding the industry in which it operates.

These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict

and that could cause actual results to differ materially. Accordingly, you should not rely upon forward-looking statements as a prediction of actual

results and actual results may vary materially from what is expressed in or indicated by the forward-looking statements. This cautionary statement is

applicable to all forward-looking statements contained in this proxy statement and the material accompanying this proxy statement.

Industry and Market Data

The Gartner Report(s) described herein, (the “Gartner Report(s)”) represent(s) data, research opinion or viewpoints published, as part of a syndicated

subscription service, by Gartner, Inc. (“Gartner”), and are not representations of fact. Each Gartner Report speaks as of its original publication date

(and not as of the date of this Filing) and the opinions expressed in the Gartner Report(s) are subject to change without notice.

I. Executive Summary

[

3 ]

Why Are We Here?

Based on our extensive analysis of BMC, we believe the following:

By any objective measure or any relevant time period, against any pertinent benchmark, BMC common stock has

significantly under-performed

BMC’s execution over the past several years has been poor on numerous fronts, and its growth has been non-existent

Despite BMC’s clear product strength, the competitive landscape in BMC’s enterprise distributed business is becoming

increasingly challenging, with threats from larger scale players, bundled product providers, as well as newer SaaS and

cloud vendors

Instead of fresh insights or innovative plans, BMC has instead responded with the same “solutions”

that have failed so

often in the past –

BMC needs new ideas and it needs them NOW

The Board of Directors would significantly benefit from Elliott’s Nominees who bring senior-level experience from

leading software and technology companies, a new approach and an

openness to thoughtful evaluation of the business

Conclusion:

Elliott

believes

that

BMC

is

not

a

good

–

but

a

GREAT

–

company

that

can

return

significant

and

long-overdue value to its stockholders if it chooses to embrace new Directors with new ideas

The time is now

to bring a fresh perspective to the BMC Board of Directors

Elliott

Management

and

its

collective

funds

–

holders

of

6.5%

of

BMC’s

common

stock

–

welcome

the

opportunity to present its viewpoints on BMC and its plan to deliver significant value to stockholders

[

4 ]

About Elliott

More than $20 billion of assets under management

Extensive experience in the technology sector, including successful investments in Novell, MSC Software, Epicor Software,

Blue Coat Systems, Metrologic, and others

Long-term

view

of

investments

and

a

focus

on

creating

value

for

all

stockholders

–

recent

examples

include

URL

Pharmaceuticals, Adelphia Communications, WorldCom Communications, and Horizon Offshore

Elliott, founded in 1977, is one of the oldest private investment firms of its kind under continuous management.

The firm’s investors include pension funds, private endowments, charitable foundations, family offices, and

employees of the firm

Elliott has performed exhaustive research on BMC over the last six months, a process which included enlisting external

consultants to advise us, as well as speaking with customers, opinion leaders, engineers, competitors, former employees,

senior executives in the software industry, investment bankers, private equity firms and other investors

Elliott has surveyed in excess of five hundred users of IT management software, following up with customers who have

transitioned to or away from BMC

Our conclusion from this analysis is that BMC's assets are valuable and important, but that its future will be increasingly

difficult if BMC remains with its existing strategy

New Board perspectives are needed to fully realize BMC’s value potential

ELLIOTT’S RESEARCH AND PERSPECTIVES ON BMC

[

5 ]

BMC’s Material Stock Price Underperformance

By any objective measure, over any relevant time period and against any pertinent benchmark, BMC's shares

have significantly under-performed

Source:

Capital IQ

1.

03/18/12

represents

date

on

which

Elliott’s

purchase

of

over

9mm

shares

of

BMC

began,

causing

stock

prices

subsequent

to

this

date

to

not

be

applicable

due

to

this

extraordinary

support

2.

10-K Peers include IBM, HPQ, and CA; listed as BMC’s closet competitors in the Company’s annual 10-K report

3.

Proxy

Peers

include

SYMC,

CPWR,

ADBE,

CA,

ORCL,

MSFT,

SAP,

CTXS;

listed

in

BMC’s

annual

proxy

statement

for

LTIP

determination

purposes

4.

Includes Nasdaq, S&P 500, and Dow Jones Industrial indices

Ending

March

18,

2012

1

YTD

3-Year

2-Year

1-Year

March

18,

2012

1

1. VERSUS CLOSEST COMPETITOR

CA

64.0%

16.1%

19.1%

34.1%

BMC

21.9%

(1.9%)

(19.3%)

16.3%

(Under) / Over Performance

(42.2%)

(18.0%)

(38.4%)

(17.8%)

2.

VERSUS

10-K

PEERS

2

10-K Peers

56.8%

8.0%

3.5%

12.2%

BMC

21.9%

(1.9%)

(19.3%)

16.3%

(Under) / Over Performance

(35.0%)

(9.9%)

(22.8%)

4.1%

3.

VERSUS

PROXY

PEERS

3

Proxy Peers

86.9%

21.5%

10.8%

22.1%

BMC

21.9%

(1.9%)

(19.3%)

16.3%

(Under) / Over Performance

(65.0%)

(23.4%)

(30.1%)

(5.8%)

4. VERSUS BROADER SOFTWARE INDEX

S&P GSSI Software Index (iShares)

104.9%

33.8%

12.8%

19.3%

BMC

21.9%

(1.9%)

(19.3%)

16.3%

(Under) / Over Performance

(83.1%)

(35.7%)

(32.1%)

(3.0%)

5. VERSUS BROADER MARKET INDICES

Market –

Mean

4

87.9%

24.3%

12.3%

10.7%

Market –

Median

4

79.1%

23.2%

11.6%

10.0%

BMC

21.9%

(1.9%)

(19.3%)

16.3%

(Under) / Over Performance -

Mean

(66.1%)

(26.2%)

(31.7%)

5.6%

(Under) / Over Performance -

Median

(57.2%)

(25.1%)

(30.9%)

6.3%

BMC’s Material Stock Price Underperformance (cont’d)

Source:

Capital IQ

1.

As

of

03/18/12,

which

represents

date

on

which

Elliott’s

purchase

of

over

9mm

shares

of

BMC

began,

causing

stock

prices

subsequent

to

this

date

to

not

be

applicable

due

to

this

extraordinary

support

2.

Represents average of Nasdaq, S&P 500, and Dow Jones Industrial indices

3.

Proxy

Peers

include

SYMC,

CPWR,

ADBE,

CA,

ORCL,

MSFT,

SAP,

CTXS;

listed

in

BMC’s

annual

proxy

statement

for

LTIP

determination

purposes

4.

10-K Peers include IBM, HPQ, and CA; listed as BMC’s closet competitors in the Company’s annual 10-K report

[

6 ]

Over any relevant time frame, BMC’s stock has consistently underperformed the market

and its peers

Oct 26, 2011

–

BMC beats Q2

revenue estimates but

again

lowers forecast

for ESM license

bookings growth from mid-teens

percentage growth to mid-single

digits percentage decline

[

7 ]

Destruction of Stockholder Value

Poor execution has caused stock price degradation over the past 12 months¹

Source:

Capital IQ, Company Filings

1.

LTM

as

of

03/18/12,

which

represents

date

on

which

Elliott’s

purchase

of

over

9mm

shares

of

BMC

began,

causing

stock

prices

subsequent

to

this

date

to

not

be

applicable

due

to

this

extraordinary support

2.

Represents mean of Nasdaq, S&P 500, and Dow Jones Industrial indices

Jul 27, 2011

–

BMC misses

Q1

revenue estimates  by ~1%, and

lowers

forecast for ESM license

bookings growth from low 20s

to

mid-teen

percentages

Feb 1, 2012

–

BMC misses

Q3 revenue estimates by

~1.5% and lowers ESM

license bookings decline to

high single digits to low

double digits

Significant

Underperformance

Relative

to

Market

Indices

²

by

32%

[

8 ]

What is BMC Today?

SEGMENT

REVENUE BREAKDOWN

OVERALL STATISTICS

COMMENTARY

Enterprise

Service

Management

(“ESM”)

Growth below its potential

License bookings have woefully

underperformed over the past year

Room for margin improvement

Margins have been stuck at ~21% but

should be higher given $1bn+

revenue scale

Leader in IT management software

Despite execution failures, ESM

possesses a comprehensive portfolio

of market leading products used by

over 25,000 customers

Mainframe

Service

Management

(“MSM”)

Strong stable business

Good margins and cash flow capability

Benefited from “benign neglect”

and lack

of new competition

Over a third of the business is workload

automation, which is growing and taking

share

($ in millions)

% Operating Margin

n/a

21.0%

21.9%

21.0%

% Operating Margin

n/a

56.5%

57.5%

59.9%

Source:

Company Filings

1.

FY2002A ESM revenues include Other Software revenues.  ESM and MSM revenues exclude Other revenues of $7.9mm

BMC is really comprised of two businesses

ESM

has

been

the

focus

for

the

past

ten

years,

though

growth

and

margins

have

been

weak

despite

strong

products

and

good

markets

MSM has continued to perform well, but it has become a smaller piece of the business

61.8%

61.9%

59.8%

55.1%

FY2002A

FY2010A

FY2011A

FY2012A

% of Total Revenue

38.2%

38.1%

40.2%

44.9%

FY2002A

FY2010A

FY2011A

FY2012A

% of Total Revenue

II. Drivers of BMC’s Underperformance

[

10 ]

What Went Wrong with BMC?

Management has failed to execute

Despite

a

much

smaller

revenue

base

relative

to

its

larger

competitors

and

substantial

investments

in

sales

and

marketing,

BMC

revenue

growth has been anemic

Sales execution has been poor and ESM license bookings have actually declined despite significant sales and marketing investments trumpeted

by senior management

BMC

was

late

to

SaaS

and

is

now

playing

“catch

up”

against

emerging

and

established

competitors

in

this

high-growth

market

Poor stewardship of stockholder's capital

BMC has been squandering billions of dollars of stockholder capital on an ineffective M&A strategy

BMC

has

chosen

to

preserve

an

inefficient

balance

sheet

when

the

opportunity

to

return

capital

has

been

attractive

Failure to fully optimize operations

ESM generates operating margins of only 21% despite revenues of over $1bn

Adjusting for capitalized R&D and stock-based compensation, BMC’s consolidated operating margin is lower than its closest peer

BMC has historically struggled to generate positive gross margins in its professional services business

Competitive landscape is changing

BMC

has

great

products

and

deep

customer

presence,

but

is

facing

an

increasingly

competitive

environment

Large

enterprise

customers

are

increasingly

demanding

bundled

solutions

and

BMC

lacks

the

scale

of

its

“Big

3”

Management

Software

competitors (IBM, HP, and CA)

More nimble companies with refreshed offerings such as ServiceNow, SolarWinds, and Splunk are emerging as new threats in areas where

BMC used to win on the basis of best-in-class point tools (eg. service desk)

Strong need for Directors with relevant experience and fresh ideas

BMC's

Board

would

be

well

served

to

include

more

Directors

with

technology

backgrounds,

especially

in

today’s

rapidly

changing

marketplace

Elliott’s Nominees include former CEOs and senior executives who bring perspectives from significant Software/Technology companies and

expertise with emerging business models (eg. Cloud)

Our

Nominees

are

highly

experienced

executives

willing

to

challenge

the

status

quo

at

BMC

and

explore

all

alternatives

to

create

stockholder

value

Conclusion:

Elliott believes that there is an opportunity for stockholders to realize value SIGNIFICANTLY greater than

BMC’s current stock price through the addition of thoughtful and experienced technology executives who

will encourage a full strategic and operational review with the aim of maximizing stockholder value

5

4

3

2

1

[

11 ]

Management Has Failed to Execute

“So

over

the

course

of

Fiscal

2009,

we

significantly

strengthened

our

sales

force.

We

invested

in

the

most

complete

and

powerful sales training in our history.  We brought in new management and sales professionals to upgrade an already strong

and talented team”

–

Bob Beauchamp (2009 Annual Report)

“The organizational separation of our MSM business from our ESM business two years ago continues to pay

dividends.

Our offerings today are superior to the competition’s and our people are energized and focused”

–

Bob Beauchamp (2008 Annual Report)

“The separation of our two business units—ESM and MSM—at the beginning of 2007 provides sharper focus and

greater accountability.

And the operating and financial discipline we’ve instilled across our company makes us a faster, more

agile, and more productive enterprise”

–

Bob Beauchamp (2007 Annual Report)

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012

“We

substantially

upgraded

our

Enterprise

Service

Management

(ESM)

sales

force

and

expect

that

we’ll

increase

the

average number of productive sales reps in fiscal 2011 by 20% over last year’s levels”

–

Bob Beauchamp (2010 Annual Report)

“We also strengthened our ESM sales team, achieving a 20% increase in the average productive sales headcount compared

to the prior year, while significantly slowing attrition”

–

Bob Beauchamp (2011 Annual Report)

“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…. 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”

–

Bob Beauchamp (Q4 and FY2012 Earnings Call on May 9, 2012)

First, it was

“separate ESM

and MSM”

Then,  four

years of

management

“focus”

on

strengthening

ESM sales

force, which

clearly

remains a

major issue

1

BMC

management

repeats

the

same

old

story

year

after

year,

with

no

demonstrable

progress,

whether

it’s

extolling the benefits of separating ESM and MSM, or repeating the benefits of investing in its sales force

Management Has Failed to Execute

MANAGEMENT’S REPRESENTATIONS ON SALES AND MARKETING INVESTMENTS

LTM SALES & MARKETING AS % REVENUE

“These [Fiscal Year 2011] strong results underscore the success of our strategy over the last several years to make disciplined investments that

enhance our market leadership and enable us to accelerate top line growth. As part of this strategy, we strengthened our sales force,

increased internal R&D efforts related to cloud and other major technology trends, selectively acquired complementary technologies in rapidly

growing market segments and bolstered our strategic partnerships. These initiatives are clearly paying off and we expect to reap

additional

benefits

in

2012

and

beyond”

–

Bob Beauchamp (Q4 2011 Earnings Conference Call)

“It [Fiscal Year 2011] was a year in which we transitioned from being a strong, moderate growth company to one characterized by sustained,

accelerating growth

[BMC’s emphasis] led by a solid Enterprise Service Management (ESM) engine capable of delivering ongoing double-

digit growth”

–

Bob Beauchamp (2011 Annual Report)

“It [Fiscal Year 2011] was a year in which we demonstrated our ability to achieve these results while at the same time making the

investments

in

internal

development,

sales

and

services

necessary

to

increase

our

competitive

advantage

[BMC’s

emphasis]”

–

Bob Beauchamp (2011 Annual Report)

LTM REVENUE GROWTH

Y-o-Y Growth

3.7%

Y-o-Y Growth

6.7%

Enterprise

Solutions

1

Despite increasing investments in Sales and Marketing, BMC has failed to generate meaningful ESM revenue

growth

Source:

Company Filings

Note:

LTM as of 03/31/12

1.

CA Sales and Marketing expense adjusted for $22mm restructuring charge

2.

BMC

excludes

Professional

Services

for

a

direct

comparison

with

CA’s

Enterprise

Solutions

segment;

CA

reports

Professional

Services

as

a

separate

segment

¹

ESM

²

29.2%

28.5%

2.3%

12.1%

[

13 ]

Q4 2011

Q1 2012

Q2 2012

Q3 2012

FY 2013 Prediction

“The assumptions

underlying our full year

fiscal 2012 expectations

include…

ESM license

bookings growth in the

low 20’s”

MANAGEMENT GUIDANCE ON ESM SEGMENT FOR FISCAL YEAR 2012

“The assumptions

underlying this full year

fiscal 2012 estimate include

total bookings growth in

the low double digits, with

the skew of full-year

booking expected in the

first half of the year to be

similar to the prior year.

ESM license bookings

growth in the mid-teens”

“Due to our performance in

the first half and our

current outlook for the

remainder of the year, we

are lowering our full year

expectations…

The

assumptions underlying

our full year fiscal 2012

expectations include: total

bookings growth in the

mid-single digits; ESM

license bookings decline

in the mid-single digits”

The assumptions

underlying our full year

fiscal 2012 expectations

include: total bookings

growth flat with the prior

year; ESM license

bookings decline of high

single digits to low

double digits

with solid

sequential growth in the

fourth quarter”

“Total ESM license

bookings were $153

million in the fourth

quarter, down 5% from

the year-ago period…

For the fourth quarter,

Numara contributed

almost 4 points of

growth to ESM license

bookings”

MANAGEMENT’S ESM LICENSE BOOKINGS GROWTH PREDICTIONS FOR FISCAL YEAR 2012

1

BMC’s

management

projected

+20%

ESM

license

bookings

growth

when

the

year

ended

with

-11%.

This

represents a profound failure to understand BMC’s underlying business trends and challenges

Where Was the Board’s Oversight During This Colossal Failure?

Q4 2012

“The assumptions

underlying our full year

fiscal 2013 expectations

include…

ESM license

booking growth in the

low double-digits…

annualized bookings

growth in the low double-

digits”

???

???

Management Has Failed to Execute

(11%)

Q2 12

Prediction

Q3 12

Prediction

Q4 12

Actual

Low Double Digits

"High Single Digits to

Low Double Digits Decline"

"Mid-Single

Digits Decline"

"Mid-Teens"

"Low 20's"

Q4 11

Prediction

Q1 12

Prediction

FY 13

Prediction

[

14 ]

Market

entrants

like

Service-Now

(launched

in

2004)

and

Solar

Winds

(launched

in

1999)

saw

the

opportunity

in

the

marketplace

BMC

was

late,

launching

Remedy

OnDemand

and

RemedyForce

in

2010,

which

only

generated

$10mm

of

revenues

in

FY2012

CAGR: 166%

$1.9

$8.8

$19.3

$43.3

$92.6

2007

2008

2009

2010

2011

“It’s not all going to be Software as a Service,

I’ve met no CIOs who think that”

–

Bob Beauchamp

(2007, Interview with The Australian)

BMC has been slow to adapt to changes in the market place, including a well-publicized failure to quickly

identify trends in SaaS solutions and cloud management

Source:

Capital IQ, Company Filings, News Reports

WHAT MIGHT HAVE BEEN -

REVENUE TRAJECTORY

($ in millions)

1

“SaaS initiative includes our new BMC

Remedy OnDemand Solution, which provides

customers with a full industry leading service

management offering delivered as a service”

–Bob Beauchamp

(Q4 2010 Earnings Conference Call)

“We were then late, unfortunately, as you

well know, to the SaaS market. So when it

turned to SaaS, we didn't have a great

answer at the same time”

–Bob Beauchamp

(Q4 2012 Earnings Conference Call)

Management Has Failed to Execute

Source:

Capital IQ, Company Filings

Note:

LTM as of 03/31/12 except HPQ which is as of 04/30/12

1.

Excludes impact of $13.6mm deferred revenue assumed in connection with Numara acquisition

2.

Represents as reported Global Business Services segment operating profit before tax

3.

Represents as reported Service segment operating margin

4.

Represents as reported Professional Services segment operating margin

5.

Represents as reported Professional Services gross margin

LTM REVENUE GROWTH COMPOSITION -

BMC

LTM PROFESSIONAL SERVICES OPERATING MARGIN

During FY2012, total license revenue grew by only 1.5% and bookings remained flat year-over-year, while Professional Services

grew greater than 20%

Professional

Services

is

–

at

best

–

a

break-even

segment

at

the

gross

margin

level

Gross margins have been historically negative with segment barely breaking even at the gross margin level in 2012

BMC’s

only

real

area

of

revenue

growth

is

coming

from

its

low

margin

Professional

Services

segment

Management Has Failed to Execute

1

BMC’s growing Professional Services

segment barely breaks even at the gross

margin

level compared to peers who have

significant operating margins

[

15 ]

Deal

LTM

LTM Rev.

Target

Value

Revenues

Multiple

15

MQSoftware ¹

27

n/a

n/a

16

Emprisa Networks

22

n/a

n/a

17

Aeroprise

n/a

n/a

18

Neon Enterprise

n/a

n/a

19

Neptuny ²

20

n/a

n/a

20

OpenNetwork

18

n/a

n/a

21

I/O Concepts Software

14

n/a

n/a

22

KMXperts

5

n/a

n/a

23

DGI

3

n/a

n/a

24

Abydos

n/a

n/a

n/a

25

StreamStep

n/a

n/a

n/a

26

ITM Software

n/a

n/a

n/a

27

Corosoft Technologies

n/a

n/a

n/a

Total

$2,418

$514

Median Multiple Paid

5.8x

21 ³

[

16 ]

Poor Stewardship of Stockholder Capital

Source:

Company Filings, Capital IQ, 451 Research

1.

Phurnace

Software,

Tideway

Systems,

and

MQSoftware

were

acquired

for

combined

purchase

consideration

of

$94.3mm

per

BMC

filings;

Individual

deal

value

estimated

per

451

Research

2.

GridApp and Neptuny were acquired for combined purchase consideration of $51.5mm per BMC filings; Individual deal value estimated per 451 Research

3.

Aeroprise and Neon Enterprise were acquired for combined purchase consideration of $21.0mm per BMC filings

10-YEAR M&A TRACK RECORD

BMC

has

paid

significantly

high

multiples

for

its

acquisitions

27 acquisitions for $2.4 billion aggregate value

Paid high revenue multiples for relatively low revenue scale businesses (e.g. 17.5x for RealOps, 13.3x for Phurnace, 11.7x for GridApp, 11.4x for

BladeLogic, 6.5x for Coradiant, 5.8x for Marimba)

BMC spends an inordinate amount of time on extremely small acquisition targets

Despite small revenue base, revenue growth has not followed

We

question

BMC’s

ability

to

effectively

integrate

its

acquisitions

and

maintain

their

targets’

growth

trajectories

2

BMC has an ineffective M&A track record

Deal

LTM

LTM Rev.

Target

Value

Revenues

Multiple

1

RealOps

$53

$3

17.5x

2

Phurnace ¹

40

3

13.3x

3

GridApp ²

35

3

11.7x

4

BladeLogic

811

71

11.4x

5

Coradiant

130

20

6.5x

6

Marimba

225

39

5.8x

7

IT Masters

43

10

4.3x

8

ProactiveNet

41

10

4.1x

9

Numara

300

90

3.3x

10

Tideway Systems ¹

30

15

2.0x

11

Remedy

350

250

1.4x

12

Identify

150

n/a

n/a

13

Magic Solutions

49

n/a

n/a

14

Calendra

33

n/a

n/a

($ in millions)

See Next Slide

Only

[

17 ]

Source:

Company Filings, Capital IQ, 451 Research

1

Represents LTM revenues of acquired companies at the time of acquisition if disclosed

2

Represents

implied

revenues

from

acquisitions

and

organic

growth

to

bridge

from

FY2002A

reported

revenue

and

disclosed

LTM

revenue

of

acquired

businesses

to

FY2012A

reported

revenue

ANALYSIS

OF

REVENUE

GROWTH

–

PAST

10

YEARS

2

BMC has failed to meaningfully grow organically over the last 10-years

Moreover, once BMC acquired its high growth targets those same targets appear to have slowed their growth

considerably once part of BMC

BMC’s acquisition strategy is an enormous use of capital and time and doesn’t appear to help generate meaningful organic revenue growth

This calls into question BMC’s core organic growth and its lack of progress with maintaining growth in target businesses once acquired

Likely organic revenues of less than $369 million, accounting for revenue not reported for 16 acquisitions where targets were presumably

generating

revenues

and

for

incremental

growth

from

targets

with

disclosed

revenue

($ in millions)

10-Years of organic growth

+ Undisclosed M&A revenue

+ “Growth”

from acquired businesses

$1,289

$1,803

$2,172

$514

$369

Poor Stewardship of Stockholder Capital

FY2002

Actual

Reported Revenue

Revenue Contribution

for Acquired Businesses ¹

Implied Organic Growth

+ Undisclosed Revenue

Contribution from Acquired

Businesses + Revenue

Growth of Acquired

Businesses ²

FY2012

Actual

Reported Revenue

FY2002

Actual Reported

Revenue + Revenue

Contribution from Acquired

Businesses

34.2%

32.0%

35.9%

27.7%

[

18 ]

Failure to Fully Optimize Operations

Source:

Capital IQ, Company Filings

1.

Represents as reported non-GAAP operating margin

2.

Represents as reported non-GAAP operating margin

3.

Based on non-GAAP operating income of $1,647.0mm less $180.0mm capitalized software development cost, less $89.0mm stock based compensation, plus $122.0mm of amortized software

development cost, plus $42.0mm of severance costs

4.

Based on non-GAAP operating income of $779.6mm less $132.5mm capitalized software development cost, less $12.0mm stock based compensation associated with capitalized software

development cost, less $127.2mm stock based compensation, plus $93.6mm of amortized software development cost

HISTORICAL ESM OPERATING MARGIN

FY 2012 OPERATING MARGIN COMPARISON

HISTORICAL SERVICES GROSS MARGIN

BMC’s reported operating margin is higher than its closest peer CA, however, expensing all of BMC’s R&D and stock-based

compensation presents a less flattering reality

Actually indicates a margin shortfall to CA

ESM reported operating margin of only 21% despite over $1 billion in revenues

BMC has only now started to generate positive Professional Services gross profits, but 0.8% gross margin is still disappointing

Meanwhile, BMC’s “Big 3”

peers are generating an average operating margin of 11%

As Reported

Normalized

4

¹

³

²

800 bps Lower

21.0%

21.9%

21.0%

FY 2010

FY 2011

FY 2012

(6.7%)

(5.3%)

0.8%

FY 2010

FY 2011

FY 2012

3

BMC margins have not been optimized to maximize returns to stockholders

12.0%

10.5%

8.7%

5.2%

$3.4

$2.2

$125.0

$107.0

$28.5

$4.8

$238.7

$48.4

$13.2

$6.3

[

19 ]

Competitive Landscape is Changing

Source:

Capital IQ, Company Filings

Note:

LTM as of 03/31/12. HPQ as of 01/31/12 since HPQ reclassified segments during quarter ending 04/30/12 and revenue contribution from Autonomy unavailable

1.

As

of

03/18/12,

which

represents

date

on

which

Elliott’s

purchase

of

over

9mm

shares

of

BMC

began,

causing

stock

prices

subsequent

to

this

date

to

not

be

applicable

due

to

this

extraordinary

support

2.

Includes revenues from DemandTec and other acquisitions which closed in the LTM period as of 3/31/12

3.

Includes revenues from Autonomy and other acquisitions which closed in the LTM period as of 1/31/12

4.

HPQ

Software

LTM

revenue

growth

pro

forma

for

Autonomy

acquisition

per

Wall

Street

estimates

which

closed

in

October

2011;

not

pro

forma

for

other

transactions

given

lack

of

publicly

available

information

5.

IBM

Software

LTM

revenue

growth

pro

forma

for

DemandTec

acquisition

per

Wall

Street

estimates

which

closed

in

February

2012;

not

pro

forma

for

other

transactions

given

lack

of

publicly

available

information

RELATIVE SIZE –

MARKET CAP ¹

($ in billions)

RELATIVE SIZE –

LTM REVENUES

($ in billions)

BMC

has

long

been

the

smallest

of

the

“Big

4”

management

software

competitors,

attempting

to

compete

and

grow

on

the

basis

of

being

a

focused

BSM vendor

BMC is challenged to compete with vastly larger solutions providers who can offer a fuller suite of products along with greater marketing heft and

overall value to the customer

Customers

are

increasingly

demanding

greater

services,

a

bundled

solutions

provider,

and

breadth

of

IT

offerings

far

beyond

what

BMC

can

offer, especially in a mature market like IT management

4

BMC

lacks

the

scale

of

its

“Big

3”

competitors

LTM REVENUE GROWTH

Even at Considerably Smaller Revenue Scale, BMC’s Growth is Extremely Unimpressive Relative to its Competitors

Software ³

Software ²

Software

4

Software

5

[ 20 ]

Competitive Landscape is Changing

NEXT GEN / SAAS SYSTEMS MANAGEMENT IPOS

BMC’s

traditional

competitive

“sweet

spot”

is

under

assault

from the “Big 3”

larger infrastructure software and fast-

growing niche players

Competition continues to intensify and will continue

unabated

COMPETITIVE LANDSCAPE

EMERGING MODELS

A WINDOW TO MONETIZE IS STILL AVAILABLE

New models such as virtualization, on-demand delivery

and cloud services have upended old paradigms

Investors are keenly focused on new models and rewarded

them with successful IPOs and ever-increasing valuations

putting many potential M&A targets out of reach for BMC

Several traditional on-premise enterprise software vendors

subject to similar market and competitive forces that BMC

faces today delivered significant premiums to stockholders

by objectively evaluating alternatives and concluding a sale

was in stockholder’s best interest

Source:

Capital IQ, 451 Research

1.

Represents market capitalization as of 05/25/12

2.

Represents one day premium to unaffected stock price on  9/19/10, day before IBM announced its acquisition of the company

3.

Represents

one

day

premium

to

unaffected

stock

price

on

3/2/10,

day

before

Elliott

announced

its

proposal

to

acquire

the

company

TEV

LTM EBITDA

Spot

($ in millions)

($bn)

Multiple

Premium Paid

Netezza ²

$1.7

86.6x

14.9%

ArcSight

1.5

57.7x

23.9%

McAfee

6.9

17.4x

60.4%

Quest

1.9

13.1x

18.6%

Sun

5.6

12.6x

42.0%

Novell ³

1.0

9.7x

28.0%

4

Traditional “Big 3”

Next Gen / “SaaS”

Equity Value

Current Equity

($ in millions)

at IPO

Value ¹

% Appreciation

SolarWinds

$814

$3,526

333%

VMWare

10,878

40,170

269%

Splunk

1,573

3,325

111%

SYSTEMS

MGMT

/

INFRASTRUCTURE

–

M&A

Strong Need for Improved Corporate Governance

Elliott has thoroughly evaluated BMC’s board composition and there are a few directors with experience as CEOs and

Senior

Executives

of

large

and/or

publicly-traded

companies,

with

some

operational

experience

at

Technology

companies…

CEO of Open Text and other executive positions

Chairman, CSO of

Publicly Traded

Software Company

BMC Board: 8 Years

Thomas Jenkins

Software Industry

Executive

BMC Board: 5 Years

Gary Bloom

President & CDO of Marklogic, a privately-held software company

CEO of eMeter, a private software company acquired by Siemens

Vice Chairman and President of Symantec

Chairman,

President

&

CEO

of

Veritas

Software

Also spent 3 years as a consultant to TPG and 14 years at Oracle

EVP & CFO of Autodesk and SVP & CFO of Logitech

Various positions at Dell and at HP in finance and

business-management roles

CFO, Publicly Traded

Software Company

BMC Board: 2 Years

Stephan James

Former International Chairman and COO of Accenture

Ltd.

Former COO,

Publicly Traded IT

Services Firm

BMC Board: 2 Years

Mark Hawkins

On

the

BMC

Board

for

25

years,

Mr.

Gafner

is

described

as

a

private investor, self-employed consultant in the

communications technology field, and as a former CEO of "a

privately held manufacturer of high-speed satellite earth stations

for data distribution"

CEO, Private

Company

BMC Board: 25 Years

Meldon

Gafner

On

the

BMC

Board

for

15

years,

Mr.

Tinsley

is

described

as

an

Advisory Director, former partner and Special Advisor to a

private equity investment firm

President

&

COO

of

Baan

Company

N.V.,

in

mid-

to

late-1990s,

and was previously a management consultant at McKinsey

Consultant / Advisor

BMC Board: 15 Years

Tom Tinsley

On

the

BMC

Board

for

11

years,

Mr.

Barfield

is

President

and

CEO of a private investment company

Previously Chairman and President (1995 -

2012) of the Bartech

Group, a family business founded by his father that specializes

in "human capital procurement" and "placement of engineering

and IT professionals"

Consultant / Former

CEO, Private

Company

BMC Board: 11 Years

Jon Barfield

On

the

BMC

Board

for

10

years,

Ms.

O’Neil

is

President

and

CEO of Liberty Street Advisors, a private company she founded

that advises on corporate governance, risk management,

infrastructure needs, leadership alignment and change

initiatives

Spent 9 months as General Manager of IBM's Global Financial

Markets Infrastructure Group, and spent 24 years at the Federal

Reserve Bank of New York in a series of executive roles

Consultant / Advisor

BMC Board: 10 Years

Kathleen O'Neil

Currently a "management consultant specializing in the areas of

corporate finance, accounting and strategy" 

Formerly EVP and CFO of Genentech

Chairperson of Accuray, a designer of medical radiation

systems; and Allergan, a multi-specialty healthcare company

Consultant / Former

CFO, Public

Company

BMC Board: 4 Years

Louis Lavigne, Jr

5

…however, Elliott believes that BMC’s significant underperformance is due to a deficit on the Board of relevant and

timely

experience

in

Enterprise

Software,

emerging

business

models

("SaaS"

and

"Cloud"),

and

critical

skillsets

(Large

Cap, M&A)

[

21

]

Source:

Company Filings, Capital IQ

III. Elliott’s Proposal to Unlock BMC’s Strategic Value

[

23 ]

Increasing BMC’s Value to Stockholders

Value is derived from attractive assets of well-integrated, mission-critical products; meaningful customer presence and

relevance to tens of thousands of IT organizations

To unlock BMC’s full potential, Elliott believes that BMC’s Board needs members who are strong leaders and who offer fresh

perspectives and new ideas.  We propose that our nominees, who consist of respected technology industry executives and will

work to maximize stockholder value, join BMC’s Board

Elliott has nominated four highly experienced technology executives to the Board

If

Elliott’s

slate

of

Directors

is

elected,

we

believe

there

would

be

no

“sacred

cows”

and

a

thorough

review

of

alternatives

will

be conducted to increase stockholder value:

Explore a sale to a strategic acquirer: We believe BMC is currently attractive to multiple acquirers at a premium price

Explore a potential sale to a financial sponsor: Private Equity buyers will be interested in the whole business and/or in

MSM at prices attractive to stockholders, and can also partner with strategics

Explore more efficient capital structures and potential returns of capital to stockholders

Benefit from a more engaged Board who would assist with exploration of a strategic and operational review

1

2

4

3

There are Multiple Pathways for BMC to Create Significant Value for

Stockholders –

All of Which Can be Explored With a More Impactful Board

BMC

possesses

significant,

unlocked

value

that

we

believe

should

be

realized

for

stockholders

Opportunity to Improve BMC’s Governance

REPRESENTATIVE CREDENTIALS

Source:

Company Filings, Capital IQ

1

Former Board affiliation

2

Advisory Board

BOARD AFFILIATIONS

CEO of Engine Yard, the leading cloud platform for automating and

developing Ruby on Rails and PHP applications (2009 -

present)

CEO for Navis, Inc. (2002 to 2008), CEO for Salesforce.com

(1999 -

2001), President and CEO of Hyperion Solutions (1993 -

1999)

Five years as a nuclear submarine officer in the United States Navy

before beginning his civilian career

JOHN DILLON

Experience as CEO and Director for a

diversified group of leading publicly-

traded and private cloud computing,

SaaS

and PaaS

companies

TransAct

Technologies

Intacct

Corporation

Epicor

Software ¹

Clearwell

Systems ¹

SVP of Hewlett Packard (2006 -

2011), with responsibility for HP's

Professional Services, Consulting and Outsourcing businesses in

North America (2009 -

2011) and over 20 years in various executive

roles at Siemens AG (1985 -

2005), including CEO and President of

Siemens Communications (2004 -

2005)

Serves on the Advisory Board of leading technology companies,

including Violin Memory and Opera Solutions, a leading provider of

"Big Data" analytics

ANDREAS “ANDY”

MATTES

Experience as CEO and senior

executive for leading multinational

technology companies, including

particular expertise in Professional

Services, Consulting and Outsourcing

and "Big Data" analytics

Opera Solutions ²

Violin Memory ²

Radvision

¹

Mphasis

Ltd. ¹

CEO Experience at

Leading Technology

Companies

Software-as-a-Service

("SaaS")  / Cloud

Computing

Professional Services

Organizations at

F1000

"Big Data" and

Analytics

Transformational

Acquisitions

(Opsware, Mercury)

Successful Exits

(Epicor, Vignette,

Clearwell, Radvision)

Diversified

Backgrounds (IBM,

HP, Salesforce,

Siemens, Hyperion)

EVP of Sales, Marketing & Strategy, as well as EVP of Software &

Solutions at Hewlett Packard, during which time HP acquired

leading enterprise software companies Opsware

and Mercury

Interactive, among others (2006 -

2011)

CEO of Vignette, a leading content management software company,

prior to its sale in 2009

SVP of Worldwide Sales at Siebel Systems (1999 -

2001)

17 years at IBM in various roles, including VP of Midrange Systems,

VP of Sales, Consumer Packaged Goods, and VP, Sales Operations

THOMAS HOGAN

Experience as top executive at HP's

Software and Solutions business, a

former public-company CEO and

diverse experience at some of the

world's most prominent enterprise

software companies

InForte

Corporation ¹

DataDirect

Networks ²

"JIM" SCHAPER

Founder of Infor

Global Solutions, a leading Enterprise Software

company with 85,000 customers and 13,000 employees operating

from 116 offices in 34 countries globally

Operating partner at Golden Gate Capital

Over 30 years of experience in the Technology industry

Experience as Founder, Chairman and

CEO of one of the largest enterprise

software companies in the world, and

over 30 years in the Technology

industry

Infor

Global Solutions

Attachmate

Q2ebanking Software

SnagAJob.com

Inovis

¹

Elliott has nominated four highly experienced and respected technology industry executives who share the view that BMC

is underperforming and undervalued and who will work to explore all strategic alternatives to maximize stockholder value

[

24

]

[

25 ]

Explore a Sale to a Strategic Buyer

One of the leading global providers of IT management software products for both mainframe and distributed environments

BMC’s solutions are used by more than 25,000 customers ranging from global 100 companies to smaller businesses in more than 120

countries

Comprehensive

portfolio

of

integrated

products

particularly

well

suited

for

heterogeneous

–

cross

platform,

cross

product

-

environments in the data center

Customers value BMC’s product capabilities and its ability to manage complex heterogeneous IT environments

Leadership position in key market segments with significant cross selling opportunity

IT Service Desk (with Remedy)

Datacenter Automation (with BladeLogic)

Configuration and CMDB (with Atrium)

DBMS and Asset Management

Recognized as a leader by customers and analysts

Broad ecosystem of marquee partners across ISVs, SIs, resellers (e.g. Cisco, Accenture, Dell, CSC, Salesforce.com and others)

Mainframe

business

lends

business

and

financial

strength

–

high

margins,

strong

free

cash

flow

generation,

stable

and

predictable

business

Potential to become a more nimble provider and adapt to market transformations such as Virtualization, Cloud Computing and SaaS

Opportunity to leverage market position and gain scale in high growth segments such as APM, private cloud, infrastructure

performance management, MDM and service provider market

BMC’s issue is its operational execution and not the quality and value proposition of its products and solutions

BMC has significant strategic value with great assets that can be realized through exploring an opportunity to

sell the Company

1

[

26 ]

ACQUIRER

ILLUSTRATIVE

EPS IMPACT

BMC Provides Significant Accretion for Possible Strategic Acquirers

TEV: $243.9

Mkt Cap: $224.1

Cash: $12.3

TEV: $115.5

Mkt Cap: $130.0

Cash: $29.7

TEV: $17.2

Mkt Cap: $21.9

Cash: $13.7

TEV: $66.3

Mkt Cap: $44.2

Cash: $8.3

Expand into Heterogeneous

IT Management Software

Consolidate IT Management

Software market

Consolidate IT Management

Software market

Scale the software portfolio

Source:

Capital IQ, Thomson Reuters

Note:

Market data as of 05/25/12, balance sheet data as of last reported quarter

1.

Cost of debt of 8% for CA and SYMC

COMMENTARY

ACQUIRER

ILLUSTRATIVE

EPS IMPACT

COMMENTARY

TEV: $55.4

Mkt Cap: $87.5

Cash: $48.4

TEV: $47.4

Mkt Cap: $50.9

Cash: $6.3

TEV: $9.8

Mkt Cap: $10.9

Cash: $3.2

TEV: $10.6

Mkt Cap: $11.9

Cash: $2.7

Expand into Heterogeneous

IT Management Software

Pursue IT Management

Software market

consolidation

Expand into Heterogeneous

IT Management Software

(connect its Storage and

Security offerings)

Expand into Heterogeneous

IT Management Software

($ in billions, except per share data )

1

BMC offers a significant accretion opportunity to a potential strategic acquirer

Analysis presented below based on very conservative assumptions:

Does not assume any synergies (not even public company cost savings)

Assumes transaction funded with only domestic cash available on BMC’s balance sheet and new debt (cost of debt of 6%) ¹

Assumes no cash available

from acquirer’s balance sheet

Acquisition Price

$52.00

$56.00

$60.00

CY 2013E EPS

2.0%

1.8%

1.6%

CY 2014E EPS

2.1%

1.9%

1.7%

Acquisition Price

$52.00

$56.00

$60.00

CY 2013E EPS

2.6%

2.3%

2.1%

CY 2014E EPS

NA

NA

NA

Acquisition Price

$52.00

$56.00

$60.00

CY 2013E EPS

6.5%

5.8%

5.2%

CY 2014E EPS

6.4%

5.8%

5.3%

Acquisition Price

$52.00

$56.00

$60.00

CY 2013E EPS

3.1%

2.8%

2.5%

CY 2014E EPS

NA

NA

NA

Acquisition Price

$52.00

$56.00

$60.00

CY 2013E EPS

7.6%

6.8%

6.1%

CY 2014E EPS

9.0%

8.2%

7.4%

Acquisition Price

$52.00

$56.00

$60.00

CY 2013E EPS

12.5%

9.7%

7.0%

CY 2014E EPS

14.8%

12.3%

9.7%

Acquisition Price

$52.00

$56.00

$60.00

CY 2013E EPS

1.4%

1.3%

1.1%

CY 2014E EPS

1.5%

1.4%

1.3%

Acquisition Price

$52.00

$56.00

$60.00

CY 2013E EPS

13.2%

10.3%

7.3%

CY 2014E EPS

15.1%

12.5%

9.9%

[

27 ]

PRIVATE EQUITY RATIONALE

2

BMC Would be an Attractive Target for Private Equity

SELECTED LARGE CAP AND TECH FOCUSED PE FIRMS

Source:

Company Press Releases, Capital IQ

Alltel

$24,500

Freescale

17,600

SunGard

11,400

Avaya, Inc.

8,300

IMS Health

5,200

Sabre Holdings

5,000

Vertafore

1,400

Intergraph Corp.

1,300

SunGard

$11,400

Avaya, Inc.

8,200

Sabre Holdings

5,000

Interactive Data

3,400

Agilent

2,660

Skype [eBay, Inc.]

1,900

Serena Software

1,200

Freescale

$17,600

SunGard

11,400

Cendant (Travelport)

4,300

Emdeon

3,000

Freescale

$17,600

Open Solutions

1,300

SS&C Technologies

942

Getty Images

$2,400

Emdeon

3,000

Kronos Inc.

1,800

Intergraph

1,300

DoubleClick

1,100

Ceridian

Corporation

$5,300

West Corporation

4,100

Sword Insurance

115

SunGard

$11,400

Tex. Instr. (Sensors)

3,000

MYOB

1,250

SkillSoft

1,200

TASC [NOC]

$1,650

Emdeon

1,200

TriZetto Group

$1,400

Epicor

976

Activant

890

Sophos

830

Bankrate

571

Lawson

$2,000

SSA Global

1,700

Aeroflex

1,120

Systems Union Group

460

MAPICS

376

Datastream Systems

216

Blue Coat Systems

$1,300

SonicWALL

640

Archipelago Learning

290

Landesk

250

Double-Take Software

242

Embarcadero Tech

200

PLATO Learning

140

Entrust

114

Misys

£1,100

CDC Software

$300

Indus International

240

Sage SW (He)

£210

Intuit (RE Solutions)

$128

First Data

$29,000

SunGard

11,400

Visma

KR 5,500

Agilent

$2,660

TASC [NOC]

1,650

Flextronics

900

Quadramed

$126

Kewill plc

£87

eFront SA

€41

MSC Software

$360

First Advantage

265

Shopzilla

165

RBS WorldPay

£2,025

Fifth Third (Vantiv)

$2,350

SkillSoft

1200

Software has been a clear area of focus for the large private

equity firms

We believe private equity firms will show an interest in BMC

as a whole and the MSM business if separated

BMC’s financial and strategic profile fits the investment

criteria of private equity firms

Significant presence in a large and growing market

Attractive customer and product portfolio

High cash flow generation and margin in MSM business

Potential to improve margin in ESM business

Viable exit alternative through a strategic sale or public

market exit

Attractive financing markets have been supportive of

software take-private transactions

It

is

possible

for

private

equity

to

pay

an

attractive

premium

to

stockholders

and

still

realize

suitable

returns

for

their

investors

[

28 ]

Greater Opportunity to Return Stockholder Capital

BMC has significant excess debt capacity given its recurring revenue base, stable free cash flow generation, and current net cash

position

Company can issue debt or use excess free cash flow and excess cash for share repurchases

Returning

capital

and

addressing

operational

challenges

would

yield

significant

return

Assumes

BMC

raises

$400mm

–

$2bn

to

buy

back

shares

Assumes two scenarios: pro forma impact based on standalone FY’13E estimates and pro forma impact based on 3% operating margin

improvement on FY’13E estimates

Marginal operating improvements results in significant value to stockholders

Pro-forma LTM Net Debt/EBITDA at serviceable levels

Clearly accretive to EPS

ILLUSTRATIVE SHARE BUYBACK ANALYSIS

FY’13E EPS ACCRETION

WITH NO

OPERATING MARGIN IMPROVEMENT ¹

Source:

Capital IQ, Wall Street Research

1.

FY 2013 financial metric based on Thomson estimates as of 05/25/12.  For incremental debt up to $1.2bn, assumes 10-year notes raised at 4.5%, for incremental debt of $1.6bn assumes 7-year

and 10-year notes raised at 4.25% and 4.75%, respectively and for $2bn incremental debt assumes 7-year and 10-year notes raised at 4.5% and 5.0%, respectively

3

Premium to share price on 05/25/2012

Debt Raised

0.0%

2.0%

4.0%

6.0%

8.0%

$400

3.6%

3.5%

3.4%

3.3%

3.1%

$800

7.6%

7.4%

7.1%

6.9%

6.7%

$1,200

12.2%

11.8%

11.4%

11.0%

10.6%

$1,600

17.5%

16.8%

16.2%

15.6%

15.0%

$2,000

22.7%

21.8%

20.9%

20.1%

19.3%

Premium to share price on 05/25/2012

Debt Raised

0.0%

2.0%

4.0%

6.0%

8.0%

$400

12.5%

12.3%

12.2%

12.1%

12.0%

$800

17.1%

16.8%

16.5%

16.2%

16.0%

$1,200

22.3%

21.8%

21.4%

20.9%

20.5%

$1,600

28.3%

27.5%

26.9%

26.2%

25.6%

$2,000

34.3%

33.3%

32.4%

31.4%

30.6%

FY’13E EPS ACCRETION

WITH 3%

OPERATING MARGIN IMPROVEMENT ¹

($ in millions)

($ in millions)

(As of 5/25/12)

Dividend

Company

Yield

Corning Inc.

2.3%

Broadcom Corp.

1.3%

Intuit Inc.

1.1%

Motorola Solutions, Inc.

1.8%

Applied Materials Inc.

3.4%

Activision Blizzard, Inc.

1.5%

Altera Corp.

0.9%

Xerox Corp.

2.4%

CA Technologies

4.0%

Analog Devices, Inc.

3.3%

The Western Union Company

2.4%

Paychex, Inc.

4.2%

Xilinx Inc.

2.8%

Fidelity National Info. Services

2.4%

Maxim Integrated Products Inc.

3.4%

Amphenol Corporation

0.8%

KLA-Tencor Corporation

3.0%

Linear Technology Corp.

3.4%

Median

2.4%

BMC Software Inc.

0.0%

[

29 ]

Dividends: Another Consideration

Many leading technology companies now embrace dividends to instill managerial discipline and reward

stockholders

Source:

Capital IQ

1.

Based on analysis of current dividend paying companies from set of top 100 listed domestic technology companies by market cap

LISTED

TECHNOLOGY

COMPANIES

–

U.S.

HEADQUARTERED¹

3

(As of 5/25/12)

Dividend

Company

Yield

Microsoft Corporation

2.8%

IBM

1.7%

Oracle Corporation

0.9%

Intel Corporation

3.5%

Cisco Systems, Inc.

2.0%

QUALCOMM Incorporated

1.7%

Visa, Inc.

0.7%

Hewlett-Packard Company

2.4%

Mastercard Incorporated

0.3%

Texas Instruments Inc.

2.3%

Automatic Data Processing, Inc.

3.0%

Corning Inc.

2.3%

Broadcom Corp.

1.3%

Intuit Inc.

1.1%

Motorola Solutions, Inc.

1.8%

Applied Materials Inc.

3.4%

Activision Blizzard, Inc.

1.5%

Altera Corp.

0.9%

Xerox Corp.

2.4%

CA Technologies

4.0%

(As of 5/25/12)

Dividend

Company

Yield

Analog Devices, Inc.

3.3%

The Western Union Company

2.4%

Paychex, Inc.

4.2%

Xilinx Inc.

2.8%

Fidelity National Info. Services

2.4%

Maxim Integrated Products Inc.

3.4%

Amphenol Corporation

0.8%

KLA-Tencor Corporation

3.0%

Linear Technology Corp.

3.4%

Microsoft Corporation

2.8%

IBM

1.7%

Oracle Corporation

0.9%

Intel Corporation

3.5%

Cisco Systems, Inc.

2.0%

QUALCOMM Incorporated

1.7%

Visa, Inc.

0.7%

Hewlett-Packard Company

2.4%

Mastercard Incorporated

0.3%

Texas Instruments Inc.

2.3%

Automatic Data Processing, Inc.

3.0%

[

30]

Operational Improvements Clearly Possible

Preliminary areas of improvement

include:

Professional Services: Increase in

workforce efficiency, resulting in

higher revenue per employee

Sales & Marketing: Improvements

around coverage of clients,

standardized pricing and sales

force know-how

R&D: Cost savings by off shoring

and portfolio rationalization

G&A: Reduction in management

overhead and greater integration

of acquired companies

Elliott has conducted extensive research on BMC’s peers and concluded that BMC can achieve meaningful

operating margin expansion through operational improvements: Resulting in improved returns for BMC

stockholders

Source:

Capital IQ, Company Filings

1.

LTM 03/31/12 operating margin based on non-GAAP operating income of $779.6mm less $132.5mm capitalized software development cost, less $12.0mm stock based compensation associated

with capitalized software development cost, less $127.2mm stock based compensation, plus $93.6mm of amortized software development cost

2.

Based on incremental operating earnings from potential Professional Services gross margins of ~10% to 20% as compared to LTM 03/31/12 reported gross margin of 0.8%

4

ILLUSTRATIVE POTENTIAL OPERATING MARGIN IMPROVEMENTS ¹

Such

Improvements

Could Add

~10% to

Operating

Margins

A More

Efficient

Company

Should Also

Command a

Higher

Valuation

Multiple

Elliott’s Nominees Have Significant and Relevant Operating Experience

27.7%

32% - 39%

2% - 4%

0.5% - 1.5%

1% - 3.5%

1% - 2%

Adj. LTM

Operating

Margin

G&A    

R&D    

Sales &

Marketing

Prof. Services

Earnings

Contribution ²

LTM

Operating

Margin ¹

4

ProactiveNet

MainView

End User Experience Management

Remedy

Remedy OnDemand

RemedyForce

Numara (FootPrints)

Control-M

BladeLogic

Atrium

Marimba

[

31 ]

RELEVANT PRODUCTS

BMC has a well-regarded, strong and diverse set of

products

Products are positioned in extremely large and

attractive growth markets

The Company is at risk of missing the opportunity to

take advantage of these extremely large growth

markets

Elliott’s Board representatives will leverage their deep

industry knowledge and relevant prior experience to

maximize this opportunity

Our Nominees will provide strategic insight and

ask the hard questions to help get BMC back on

track

Now is the time for BMC to make the changes

necessary to capture the opportunity

MARKET POSITION

BMC

has

an

opportunity

to

take

share

and

grow

faster

than

its

markets

BMC’s Potential Growth Opportunity

$1.4

$1.9

2011A

2016E

CAGR: 6.2%

$17.3

$24.4

2011A

2016E

CAGR: 7.1%

$5.9

$7.0

2011A

2016E

CAGR: 3.4%

$1.8

$2.2

2011A

2016E

CAGR: 4.4%

BMC’s Potential Growth Opportunity (cont’d)

($ in billions)

4

SEGMENT

MARKET GROWTH

IT Service Desk

and Help Desk

Configuration

Management

Total

Addressable

Market

4

[

32 ]

$3.7

$6.4

2011A

2016E

CAGR: 11.4%

$4.4

$6.9

2011A

2016E

CAGR: 9.2%

Availability and

Performance ¹

Application

Management ²

Other Markets ³

Source:

Gartner “Forecast: Enterprise Software Markets, Worldwide, 2009-2016, 1Q12 Update”.  Calculations performed by Elliott

1.

Includes Distributed and Mainframe

2.

Includes Distributed and Mainframe.  Used as a proxy for Application Performance Monitoring (Distributed and Mainframe)

3.

Generally, includes markets where BMC has at least 1% market share in CY 2011.  Includes Asset Management, Other ITOM, DBMS Management (Distributed and Mainframe), User Provisioning, Job

Scheduling and Run Book Automation (Distributed and Mainframe), Backup and Recovery Software (Mainframe), and Storage Resource Management (Mainframe). Job Scheduling and Run Book

Automation (Distributed and Mainframe) used as a proxy for Workload Automation and IT Process Automation (Distributed and Mainframe)

4.

Represents

sum

of

IT

Service

Desk

and

Help

Desk,

Availability

and

Performance,

Configuration

Management,

Application

Management,

and

Other

Markets

SEGMENT

MARKET GROWTH

IV. Final Observations, Conclusions, and Next Steps

[

34 ]

Third Party Observations On BMC

ON ESM:

ON M&A:

ON CAPITAL MANAGEMENT:

BUSINESS OUTLOOK:

“…but a closer look reveals a struggling business.  The ESM business has

deteriorated

further

to

a

surprisingly

low

license

bookings

rate,

and

the

sales

force issues do not appear to be positioned to turn this around soon....Unfortunately, it

appears to us that the issues regarding the ESM business may take even longer to

rectify”

–

J.P. Morgan (Feb 2, 2012 Following Q3’12 Results)

“BMC has made a number of acquisitions in recent years, most significantly the $800

million buyout of BladeLogic in 2008, in order to diversify its offerings, but has had

trouble

integrating

them

into

a

coherent

whole.

It

pitches

its

Remedy

helpdesk,

Patrol network management, and BladeLogic server automation tools as a suite, but the

message hasn't always resonated with customers”

–

BMC Has Multiple Acquisition Suitors

Information Week (May 25, 2012)

“We believe investors should make several adjustments to the income statement in

order to compare results…

Higher rate of capitalized Software Development

added to EPS…and…lower share count added to EPS”

–

J.P. Morgan (Feb 2, 2012 Following Q3’12 Results)

“Today, BMC uses ~100% of its FCF for stock repurchases…however, during the

previous three fiscal years, BMC used 55% of its FCF for buybacks”

–

Susquehanna Investment Group (Feb 14, 2012)

“BMC

has been using it [share repurchases] to materially reduce its share count, and

in many cases at prices well above current levels....”

–

Susquehanna Investment Group (Feb 14, 2012)

“Management’s guidance is predicated on an increase in sales force productivity of

about 1-3% on top of an increase in productive tenured reps in the mid single digits

(growth rate). This means the average fully productive sales person will sell more,

which poses risk in our opinion, especially given the issues BMC appears to still be

struggling with in regards to the sales”

–

J.P. Morgan (May 10, 2012 Following Q4’12 Results)

We are not the only ones who share these perspectives on BMC:

“BMC is coming off a challenging year. If it is unable to reverse the downward

trend over the next year (in alignment with the stockholder rights plan), pressure may

increase on the board to find a buyer at levels below their current expectations. The flip

side of this likely means that even if the company doesn’t perform up to their

expectations, the stock would likely have a floor as take-out speculation could intensify”

-

RBC Capital Markets (May 18, 2012)

“BMC has historically made acquisitions to bolster growth within its lower margin

ESM segment…Numara (a SaaS-based ITSM provider) was acquired in Jan 2012 for

~$300M and will be rolled into ESM to expand BMC’s cloud portfolio…Growth in

bookings has been sluggish and is necessary to provide conviction on FY13

topline growth profile”

–

Jefferies (May 10, 2012)

“In other words, BMC is now in play. It's a wake-up call that needs to be

answered

with more than the same old responses from management”

–

BMC Software becomes a takeover target as investor calls for a sale

Houston Chronicle (May 24, 2012)

“BMC could be an attractive asset for the likes of Hewlett Packard and Dell

as

they try to shift from manufacturing PCs and into integrated business service

providers --

in the mold of a multi-decade turnaround at IBM. IT hardware and

software giants Cisco and Oracle could find BMC's software services and

cloud assets attractive

as they brace for competition from the likes of salesforce.com

(CRM) and peers such as SAP”

–

BMC Software Caught Between Cloud Boom And Tech Gloom

The Street (May 23, 2012)

[

35 ]

Conclusion & Next Steps

Our extensive research and analysis confirms that BMC has strong

products, deep customer relationships and plays in

large and growing markets

BMC has significant strategic and inherent value

that has not been unlocked for shareholders due to poor execution and

an unengaged Board

With an increasingly competitive landscape and record of significant execution challenges, the time is NOW for BMC to

consider all the alternatives to maximize shareholder value

Elliott wants to work with the Board to help the Company capitalize on the significant value present in BMC

However, new perspectives and a thoughtful approach

is needed at the Board level in the form of new Board members

The executives Elliott has identified and nominated to the Board

have substantial experience in technology and significant

industry insight –

attributes that are essential to help drive a successful outcome for BMC

There are multiple pathways for value creation

and our Board Nominees add value across the spectrum of alternatives

As one of the company’s largest shareholders, Elliott is committed to the process and fully intends to continue in its efforts

Elliott remains receptive to engaging in productive conversations with the Company about the best path forward for

BMC