Elliott Associates DFAN14A Additional proxy materials by non-management

Elliott’s Perspectives on BMC’s Significant Value and How to Unlock It

June 20, 2012

Exhibit B

[

1 ]

[

1 ]

Additional Information

Elliott Associates, L.P. and Elliott International, L.P. (“Elliott”) have filed with the Securities and Exchange Commission 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 the definitive proxy statement filed with the Securities and Exchange Commission and distributed to stockholders of the

Company on June 14, 2012 by Elliott. 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 because they contain important information. 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 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 presentation 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 presentation and the material accompanying this presentation.

[

2 ]

[

2 ]

Situational Summary

What is this election about?

Elliott

believes

BMC

can

generate

significantly

more

value

for

stockholders

through

new

perspectives

and

change

at

the

Board

BMC’s Board believes that the status quo is working and it is the best strategy for the Company and its stockholders

What is Elliott suggesting specifically? 

Elliott has nominated four independent, highly-experienced technology executives who want to take a fresh look at the best way to

create value for stockholders at BMC

We are proposing nominees who have significant operational experience, software & services experience and cloud experience and

who will have only stockholder value in mind

What is BMC suggesting specifically?

What’s new in this book?

This

book

describes

our

view

of

the

significant

value

present

in

BMC

and

why

we

believe

our

plan

is

far

better

for

stockholders

than the status quo.  We also present our Nominees and why they would bring valuable, fresh perspectives to the current Board

Elliott believes BMC’s rejection of any new insights or change is unacceptable.  We see multiple strategic

and

operational

pathways

forward

that

could

realize

significant

additional

value

for

BMC

stockholders

We

are

advocating

for

a

full

strategic

and

operational

review

to

consider

all

pathways

to

maximize

value

–

strategic

(sale,

separation of the businesses, return of capital, spin, etc) and operational (margin improvement, superior focus on execution,

better cloud investment)

BMC

is

suggesting

their

current

plan

is

the

best

one:

they

have

guided

to

a

9

percent

EPS

increase

and

mid-double

digit

ESM

license

bookings

growth.

It

is

our

view

that

even

if

these

goals

are

achieved,

stockholders

can

do

far

better.

Furthermore,

we

believe,

given

BMC’s

track

record

of

failed

execution

versus

its

guidance,

there

is

a

significant

chance

that

BMC

misses

this

plan

I. BMC is Worth Significantly More

Multiple Pathways to Realizing Significant, Unlocked Value

[

4 ]

[

4 ]

Numerous Pathways to Greater Value at BMC

Operational Improvements

Several opportunities exist including, but not limited to: 

i) Significant operating margin expansion opportunity due to bloat across multiple opex categories

ii) More effective cloud roll-out buoyed by thoughtful investment and strategy

iii) Far better execution in sales & marketing, a historically troubled area at BMC

Sale of the Entire Company

Sale of BMC could provide a very attractive outcome for stockholders

The

transaction

would

be

strategic

and

accretive

to

all

expected

potential

strategic

acquirers,

and

attractive

to

financial

sponsors

Separation of Business Segments

BMC is two entirely separate businesses with different growth profiles, different optimal capital structures and different valuation

multiples

Both ESM and MSM are attractive to buyers and we believe there are various tax structures available to minimize leakage that

could be further explored through a committed and comprehensive strategic review

Leveraged Stock Buyback

BMC has sufficient debt capacity to borrow at attractive rates and buy back stock to boost stockholder returns

Dividends

BMC has a fortress balance sheet with significant cash balance and should consider making a stronger commitment to distributing

cash to stockholders

Elliott

advocates

for

BMC’s

Board

to

engage

in

a

full

review

of

all

alternatives

available

to

maximize

stockholder value.  These include both strategic and operational

pathways, which should be considered and,

we believe, are vastly superior to the Company’s current trajectory

Here are some of the alternatives we believe should be evaluated:

33%

10%

14%

7%

BMC Unaffected Stock Price

We believe Elliott's involvement and the market's speculation has supported BMC stock's recent outperformance

2012 YTD (JAN 2 –

JUN 15)

NO ELLIOTT OWNERSHIP (JAN 2 –

MAR 16)

BEFORE ELLIOTT OWNERSHIP PUBLIC (MAR 19 –

MAY 10)

AFTER ELLIOTT OWNERSHIP PUBLIC (MAY 11 –

JUN 15)

Source:

Company Filings, Capital IQ

1.

Calculated as if BMC stock price of $38.60 on 03/16/12 tracked peer and NASDAQ performance from 03/18/12 to 06/15/12

2.

Represents BMC stock price on respective date

3.

Proxy Peers include SYMC, CPWR, ADBE, CA, ORCL, MSFT, SAP, CTXS;

listed in BMC’s FY2012 proxy filed with SEC on 06/05/12

4.

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

Period of no involvement, where BMC stock had mixed results as compared to the market and its peers

Period beginning 03/19/12 when Elliott’s purchase of ~6.5% of BMC stock began, which we believe supported the outperformance of the stock

$38.60 prior day's closing stock price on 03/16/12

Period beginning 05/14/12 when Elliott’s involvement made public, which we believe resulted in a one-day stock price jump of 8.7% and supported significant

outperformance relative to peers since

4%

(5%)

(8%)

(3%)

8%

(2%)

(4%)

(2%)

18%

17%

23%

14%

[

5 ]

Period of Mixed Results

“Outperformance”

After Elliott Ownership Made Public

No major news made public during this period

“Outperformance”

Supported by Elliott Stock Purchases

05/11/12:

$40.40 ²

03/16/12:

$38.60 ²

1

2

3

2

1

3

90%

100%

110%

120%

130%

140%

01/02/12

02/12/12

03/24/12

05/04/12

06/15/12

90%

100%

110%

120%

130%

01/02/12

01/20/12

02/08/12

02/26/12

03/16/12

90%

95%

100%

105%

110%

03/19/12

04/01/12

04/14/12

04/27/12

05/10/12

90%

95%

100%

105%

110%

115%

05/11/12

05/19/12

05/28/12

06/06/12

06/15/12

$40.40 prior day's closing stock price on 05/11/12 – which we use as “unaffected” in the presentation

Without any Elliott involvement and if BMC traded in line with NASDAQ and peers, we believe the stock price today would be approximately $35.73 ¹

1

2

3

[

6 ]

[

6 ]

Operational Improvements

-

Jim Schaper –

Chairman and former CEO, Infor., Elliott’s Board Nominee

Source:

Company Filings, Capital IQ, Thomson Reuters Estimates

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 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%

3.

Based on LTM 03/31/12 adjusted EBITDA margin applied to Thomson Reuters FY2013E revenue estimates; LTM EBITDA calculated as adjusted operating income plus depreciation

4.

5-Year average EBITDA multiple for 03/19/07 to 03/18/12

5.

Unaffected stock price of $40.40 as of 05/11/12, which represents last trading day before Elliott’s position in BMC stock was made public

1

ILLUSTRATIVE POTENTIAL OPERATING MARGIN IMPROVEMENTS

Margin opportunity is significant, with greater EBITDA suggesting premiums to unaffected value

5

of 23% –

45%

at the current multiple, and upside to 60% should the market award a historical multiple of 10.3x

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

ILLUSTRATIVE VALUE ENHANCEMENT

($ in millions)

Low Range

High Range

FY2013E EBITDA ³

$678

$678

Margin Improvement (Low / High)

4.5%

11.0%

Incremental EBITDA

$104

$253

Adjusted 2013E EBITDA

$782

$931

2013E

5-Yr Avg.

4

2013E

5-Yr Avg.

4

TEV / EBITDA Mult.

9.2x

10.3x

9.2x

10.3x

Implied Enterprise Value

$7,180

$8,035

$8,556

$9,574

Net Cash

737

737

737

737

Implied Equity Value

$7,917

$8,772

$9,292

$10,311

% Premium to Unaffected

5

23.1%

36.4%

44.5%

60.4%

“There appears to be significant opportunity for margin expansion – from professional services, tight integration of prior acquisitions and

non revenue producing headcount.  I think the Company could do far better with a focused approach to efficiency that will drive productivity

and still allow for aggressive investments to drive growth.”

[

7 ]

[

7 ]

Operational Improvements (cont’d)

BMC should be a leader

in cloud products for management software.  With over 20,000 customers and the

inertia of high-quality on-premise solutions like Remedy and Blade, BMC should be driving real growth

-

John Dillon, CEO Engine Yard, former CEO Salesforce.com., Elliott’s Board Nominee

Source:

Company Filings, Capital IQ

1.

SaaS market size as per Wall Street Research

ILLUSTRATIVE CLOUD OPPORTUNITY

SaaS and cloud present a significant market opportunity for

BMC –

execution here, with proper Board oversight, is key

Customers want BMC to succeed in cloud –

BMC offers a wealth of strong on-premise solutions that integrate well

—

BMC was late to SaaS, but the opportunity is immense for the Company to get it right

—

“We've been a BMC customer for years and they have great products.  It was our preference to stay with them but when we looked to

add SaaS, they had

nothing. The next time we refresh, we would optimally like to work with BMC but it will depend on their offering”

–

BMC on-premise customer

An understanding of the emerging technology trends, focused investment, and deep operational expertise could result in meaningful returns

TOTAL ADDRESSABLE SAAS MARKET ¹

($ in billions)

REVENUES

($ in millions)

SAAS REVENUES

($ in millions)

0.45% of Total Revenues

??? of Total Revenues

ServiceNow, a direct competitor to BMC’s

Remedy product offering, has historically

achieved revenue growth

Going forward, a significant SaaS market

opportunity potentially exists

Will BMC be able to capitalize

on this market growth?

“BMC has a real opportunity to succeed in SaaS.  However, cloud development is very different from on-premise development and

BMC’s strategy has to be different, too.  With a targeted team of SaaS developers, a reasonable budget and an aggressive timeline,

BMC should be back in the game as a leader.”

A Board of Directors with a strong background and the ability to guide management is the right approach

[

8 ]

[

8 ]

Sale of the Entire Company

We believe BMC is significantly attractive to strategic and financial sponsors alike

Strategic Buyers

BMC offers significant strategic rationale

Extensive customer presence at the IT desk

Well regarded reputation in management software and

heterogeneous environments

Ability to package and bundle hardware, other software,

services, etc.

Financial logic is further compelling

Accretive for all expected buyers

Significant synergy potential exists

BMC offers hardware vendors the opportunity to move up the

value chain and to increase margins

With over $2bn in revenues, BMC as a whole or even just ESM

moves the needle

BMC represents a compelling LBO candidate…

Recurring revenue profile with deeply installed customer base

and relationships

Highly-leverable maintenance revenue stream and mainframe

business

…with significant upside and optionality

Meaningful cost opportunity in more efficient operations

Ability to invest for growth and improve execution

Opportunity to separate ESM and MSM businesses

Exit pathway also clear

BMC should ultimately be consolidated by a strategic, but proper

execution and/or separation of the businesses may be better

done privately first

Private Equity Buyers

1.

Unaffected stock price of $40.40 as of 05/11/12, which represents last trading day before Elliott’s position in BMC stock was made public

We believe a premium of approximately 36% –

61% to the unaffected value ¹

is possible

Financially attractive with possible upside of

up to 29% premium to unaffected value ¹

[

9 ]

Separation of Business Segments

BMC is comprised of two separate companies –

we believe the Company’s value could be significantly increased

by positioning the segments’

growth, investment requirements and capital needs / structures independently

Growth Profile

Lower-growth with a focus on growing automation,

retention and maintenance

Proper Investment

Invest in automation (distributed) with mainframe having

limited needs to maintain proper execution and maintenance

retention

Focus on high margins, lean cost structure, cash flow

maximization

Capital Needs / Structure

Should be levered with a focus on returning maximum cash

to stockholders

Growth Profile

Products positioned in extremely large and attractive growth

markets

Opportunity for hyper-growth SaaS products

Proper Investment

Invest aggressively in SaaS, cloud and integrated offerings

Potential margin opportunity in more efficient execution

Capital Needs / Structure

Growth-focused, lean company using cash for targeted

development and tuck-in M&A to accelerate top-line

Recurring revenues from existing customers

and ability to grow via new contracts

Valued as mature, stable, high cash flow

generating software business

Upside potential from emerging virtualization /

cloud / SaaS market segments

Valued as high growth, dynamic distributed

environment software business

Enterprise Service Management (“ESM”)

Mainframe Service Management (“MSM”)

[

10 ]

Separation of Business Segments (cont’d)

3

Enterprise Service Management (“ESM”)

Mainframe Service Management (“MSM”)

Illustrative Potential Value Creation From Separation of Business Segments

Source:

Company Filings, Capital IQ, Wall Street Research, Thomson Reuters Estimates

Note:

LTM as of 03/31/12; Market data as of 06/15/12; Analysis does not include any tax considerations / leakage or potential revenue dis-synergies associated with a potential transaction

1.

ESM peers include CTXS, NTCT, OPNT, PEGA, QSFT and VMW; QSFT market data as of 03/08/12 –

one day prior to Insight Venture’s announcement of potential acquisition

2.

LTM EBITDA calculated as MSM segment operating income plus depreciation allocated proportional to segment operating expenses

3.

MSM peers include CA, CPWR, MCRO, PRGS, SOW

4.

Based on unaffected stock price of $40.40 as of 05/11/12, which represents last trading day before Elliott’s position in BMC stock was made public

At a conservative bifurcated valuation multiple range for the ESM and MSM segments,

BMC could realize potential premiums of 17% –

46% to the unaffected value 

ILLUSTRATIVE COMBINED VALUE ENHANCEMENT

Better current execution,  greater

confidence in growth and more

return of capital could yield further

upside

to these figures

MSM LTM EBITDA Multiple

5.0x

5.5x

6.0x

6.5x

7.0x

2.5x

3.0%

6.9%

10.9%

14.8%

18.8%

3.0x

13.4%

17.4%

21.3%

25.3%

29.2%

3.5x

23.9%

27.8%

31.8%

35.7%

39.6%

4.0x

34.3%

38.3%

42.2%

46.1%

50.1%

4.5x

44.8%

48.7%

52.6%

56.6%

60.5%

($ in millions)

LTM Revenues

$1,342

ESM Peer ¹

LTM Revenue Multiple

High:

8.6x

Low:

2.4x

Mean:

4.1x

Illustrative ESM Standalone Enterprise Value:

Revenue Multiple

Valuation Range

2.5x

$3,355

3.5x

4,697

4.5x

6,039

($ in millions)

LTM EBITDA ²

$506

MSM Peer ³

LTM EBITDA Multiple

High:

10.8x

Low:

6.3x

Mean:

7.6x

Illustrative MSM Standalone Enterprise Value:

EBITDA Multiple

Valuation Range

5.0x

$2,532

6.0x

3,038

7.0x

3,544

4

4

Additionally, opportunity exists to perform a  leveraged capital return 

in the MSM business, thereby increasing total value to stockholders

[

11 ]

Separation of Business Segments (cont’d)

While it is possible to create value through trading each segment on its own, the potential also exists to realize

superior returns if as a result of the separation various strategic and financial acquirers are able to purchase

the segments of BMC they covet most

Elliott

believes

each

of

BMC’s

business

segments

possess

significant

value

that

may

be

realized

through

an

M&A

exit,

thereby

delivering premium value to stockholders

The

ESM

business

segment

could

be

attractive

to

several

strategic

buyers

alone

and

could

generate

numerous

attractive

bids

Strategic

customer

presence,

well-positioned

products

and

significant

bundling

abilities

present

a

strong

growth

opportunity

with

enhanced execution

Significant

synergy

potential

to

a

strategic

acquirer

–

ESM’s

FY2012A

operational

expenses

of

$1,060mm

With an appropriate valuation multiple, the upside to stockholders from a sale of the ESM business segment could be enormous

It

may

potentially

be

value

accretive

to

stockholders

to

sell

only

the

MSM

business

segment

if

a

strong

bid

were

received

Generates

stable

cash

flow,

with

strategic

customer

presence

and

additional

operating

margin

improvement

potential

Moreover,

a

sale

of

the

MSM

business

segment

enables

repositioning

of

BMC

as

a

growth-focused,

leaner

ESM

business

We

believe

there

exist

several

buyers

who

would

find

the

MSM

segment

to

be

an

attractive

acquisition

If acquirers express interest in only one of BMC’s segments, there are creative transaction structures available to effect a transaction to

maximize value

We believe there are tax efficient structures available to effect the sale of both the ESM and MSM segments separately or of just one

segment with minimal potential tax leakage

3

A committed and comprehensive review of strategic alternatives would provide the Board this insight

“It is possible that one party could purchase the mainframe business separately from the aggregate company and a different party

purchase

the

ESM

businesses.

This

would

solve

some

of

the

issues

related

to

the

mainframe

business

with

some

potential

acquirers”

-

J.P. Morgan (May 15, 2012)

[

12 ]

[

12 ]

Leveraged Stock Buyback

Source:

Capital IQ, Wall Street Research, Thomson Reuters Estimates

1.

Based on stock price of $43.76 as of 06/15/12

2.

For incremental debt up to $1.0bn, assumes 5-year and 7-year notes raised at 3.5% and 4.0% respectively, for incremental

debt of $1.25bn –

$1.5bn, assumes 5-year and 7-year notes raised at 3.75% and 4.25%

respectively, and for incremental debt of $1.75bn –

$2bn, assumes 7-year and 10-year notes raised at 4.5% and 5.0%

4

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 stock repurchases

Returning

capital

and

addressing

operational

challenges

should

yield

significant

return

Assumes

BMC

raises

between

$1bn

and

$2bn

to

buy

back

stock

Assumes two scenarios:

Pro

forma

impact

based

on

standalone

FY2013E

estimates

Pro

forma

impact

based

on

0%

–

8%

operating

margin

improvement

on

FY2013E

estimates

Marginal operating improvements results in significant value to stockholders

Pro-forma

LTM

Net

Debt/EBITDA

at

serviceable

levels

Clearly accretive to EPS

ILLUSTRATIVE STOCK BUYBACK ANALYSIS

BMC could realize potential premiums to current value ¹

of 20% –

41%, if a leverage stock

buyback

of

$1.25bn

–

$1.75bn

and

operating

margin

improvements

of

2%

–

6%

are

achieved

Operating Margin Improvement

0.0%

2.0%

4.0%

6.0%

8.0%

$1,000

10.6%

17.4%

24.2%

31.1%

37.9%

$1,250

13.4%

20.5%

27.6%

34.7%

41.8%

$1,500

16.7%

24.1%

31.6%

39.0%

46.4%

$1,750

18.2%

26.0%

33.7%

41.5%

49.2%

$2,000

21.8%

29.9%

38.1%

46.2%

54.3%

FY2013E VALUE ENHANCEMENT ¹

²

($ in millions)

(As of 06/15/12)

Dividend

(As of 06/15/12)

Dividend

(As of 06/15/12)

Dividend

Company

Yield

Company

Yield

Company

Yield

Apple ²

1.8%

Automatic Data Processing

2.9%

Analog Devices

3.3%

Microsoft

2.7%

Dell ³

2.6%

Altera

1.0%

IBM

1.7%

Corning

2.3%

Xerox

2.2%

Oracle

0.9%

Broadcom

1.2%

Western Union Company

2.5%

Intel

3.3%

Intuit

1.0%

Fidelity National

2.4%

QUALCOMM

1.8%

Motorola Solutions

1.8%

Amphenol

0.8%

Cisco Systems

1.9%

Applied Materials

3.3%

Xilinx

2.7%

Visa

0.7%

Activision Blizzard

1.6%

KLA-Tencor

2.9%

Hewlett-Packard

2.4%

CA Technologies

3.8%

Maxim Integrated Products

3.4%

Texas Instruments

2.4%

Paychex

4.0%

Linear Technology

3.3%

Median

2.4%

BMC Software

0.0%

[

13 ]

[

13 ]

Dividends

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

stockholders

Source:

Company Filings, Capital IQ, Wall Street Research, Thomson Reuters Estimates

1.

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

2.

Apple announced a quarterly dividend of $2.65 on 03/19/12

3.

Dell announced a quarterly dividend of $0.08 on 06/12/12

4.

Based on Wall Street Research; calculated as operating cash flow

less capital expenditures and capitalized software development costs

LISTED TECHNOLOGY COMPANIES –

U.S. HEADQUARTERED ¹

POTENTIAL RETURN TO STOCKHOLDERS

BMC has $1.6bn cash on the balance sheet and generates significant cash flow

from

operations

–

~40%,

or

~$640mm

cash

assumed

“on-shore”

Opportunity exists for BMC to return capital to stockholders in the form of

dividends

—

Returns immediate capital to stockholders

—

Instills much-needed management discipline with capital deployment

due to "non-discretionary" nature of dividends

—

Establishes BMC in the company of other leading technology bellwethers

employing dividends as a component of Total Shareholder Return

—

Attracts a new class of institutional stockholders focused on yield

—

Accomplishes all the above while maintaining a fortress balance sheet

Analysis assumes no incremental leverage

BMC could start paying dividends to stockholders without

compromising the healthy balance sheet it currently maintains

($ in millions, except per share data)

Per Share Dividend Paid to Stockholders

$1.10

BMC Stock Price as of 06/15/12

43.76

Dividend Yield -

BMC Pro Forma

2.5%

Dividend Yield -

Comparable Technology Companies

2.4%

FY2012A BMC Cash Balance

$1,583.0

Plus: FY 2013E Free Cash Flow

4

643.5

Less: Expected Dividend Payment

(175.1)

Pro Forma FY 2013E BMC Cash Balance

$2,051.4

Dividend as % of FY2013E BMC Cash Balance

8.5%

Dividend as % of FY2013E Free Cash Flow

27.2%

[

14 ]

[

14 ]

Strategic and Operational Review

We believe that the strategic and operational opportunities to enhance stockholder value outlined in this

presentation are absolutely

worth evaluating, understanding and implementing as appropriate

Furthermore, more than one of the value creating steps could be implemented concurrently to maximize

stockholder value

Operational Improvements + Capital Redeployment could yield significant value

Creating

a

leaner,

growth-focused

business

that

returns

capital

to

stockholders

could

create

incremental

value

¹

in

the

range

of

23%

–

45%,

a

significant

opportunity

Operational Improvements + Separation of business units with Proper Capital Return

ESM

and

MSM

as

separate

businesses,

appropriately

run

for

each

side

(ESM

–

growth

focused,

MSM

–

cash

flow

return

focused)

could

yield

incremental

value

¹

in

the

range

of

17%

–

46%

Sale

of

BMC

–

in

whole,

or

in

part

Numerous parties have contacted us and we believe that the risk/reward of a sale of all or part of the business could

result

in

a

premium

of

approximately

29%

–

61%

to

the

unaffected

value

¹

and

should

not

be

dismissed

BMC’s Current Board and Management have expressly stated that they prefer their plan –

the Status Quo

We believe stockholders deserve a thoughtful Board and a constructive approach to value maximization.

These operational and strategic opportunities have the promise of potential significant value and should be evaluated

“We just don’t agree that we need four new Directors in order to execute…we refresh our Board pretty regularly, and we

think that we can do that using the strategy that we’ve been using”

–

Bob

Beauchamp

Elliott

Management

has

taken

its

fight

with

BMC

to

shareholders

Wall

Street

Journal

(June

14,

2012)

Source:

Company Filings, Capital IQ, Elliott Estimates

1.

Represents premium to unaffected stock price of $40.40 as of 05/11/12, which represents last trading day before Elliott’s position in BMC stock was made public

II. BMC’s Plan is For More of the Same…

[

16 ]

[

16 ]

BMC’s Plan is For the Status Quo

As recently as last week, BMC reiterated its plan for the Company which made obvious management’s

stubbornness to maintain the status quo.  A vote for BMC’s Directors appears to be a vote for the following:

The same

Board

The same

plan to try to improve execution in ESM

“BMC has increased ESM direct sales capacity to drive additional future revenue…Reducing turnover is an important element to increasing

the productivity of our sales force”

The same

approach to attempting to grow

“Your Board and management team are driven by a deep understanding of the software and computing industries in which we operate”

“…we've got a very strong and independent Board of Directors who have proven to be able to grow and to change as the industry grows.”

The same

plan relating to return of capital to stockholders

“In

fiscal

2013,

we

expect

the

level

of

share

repurchase

activity

to

be

consistent

with

the

prior

years.”

The same

M&A Plan

“Innovation

and

a

disciplined

acquisition

program

are

core

to

our

strategy”

The same

compensation plan

“Our

compensation

plan

is

designed

to

ensure

that

the

interests

of

BMC’s

management

team

are

directly

aligned

with

the

interests

of

all

of

our

stockholders and that senior executives continue to focus on delivering strong stockholder returns.”

This same plan hasn’t worked.  Why should stockholders trust that it will work this time?

What does it mean for the company?  Our guess is more of the same…

1

2

3

4

5

6

Source:       Management quotes from BMC’s letter to stockholders dated 06/12/12 and Wall Street Journal article “Elliott Management Has Taken its Fight with BMC to Stockholders” dated 06/14/12

[

17 ]

The

Status

Quo

–

It

Hasn’t

Worked…

3-YEAR ¹

2-YEAR ¹

By almost any objective measure, over just about any relevant time period and against almost any pertinent

benchmark, BMC's shares have significantly underperformed

Source:

Capital IQ

1.

As of 03/18/12, which represents date prior to 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

1-YEAR ¹

[

17 ]

1

104.9%

87.9%

86.9%

64.0%

56.8%

21.9%

iShares

Software

Index

Market

Indices ²

Proxy

Peers ³

10-K

Peers

4

19.1%

12.8%

(19.3%)

3.5%

10.8%

12.3%

iShares

Software

Index

Market

Indices ²

Proxy

Peers ³

10-K

33.8%

24.3%

21.5%

16.1%

8.0%

(1.9%)

iShares

Software

Index

Market

Indices ²

Proxy

Peers ³

10-K

Peers

4

Peers

4

[

18 ]

…Nor does the Status Quo look like the Best Possible Future

Based on various valuation methods, BMC’s current plan doesn’t seem to come close to the appeal of a better

Board, considering all operational and strategic options:

[

18 ]

BMC’S CURRENT STOCK PRICE AND PROSPECTS UNDER STATUS QUO

POTENTIAL VALUE ENHANCEMENT

Under any of Elliott’s proposed operational and strategic improvements, we believe there could be significant increase in value to

stockholders

Source:

Company Filings, Capital IQ, Thomson Reuters,  Elliott Estimates

1.

Represents date prior to 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.

Calculated as if BMC stock price of $38.60 on 3/16/12 tracked peer and NASDAQ performance from 03/18/12 to 06/15/12

3.

Mean analyst target price and mean long-term growth rate per Thomson Reuters as of 06/15/12

4.

Represents premium to unaffected stock price of $40.40 as of 05/11/12

5.

Represents premium to stock price of $43.76 as of 06/15/12

The status quo suggests value of $36 -

$44.  We believe stockholders can do better.

A more inquisitive Board, with open minds and new ideas has the potential to deliver greater value

Represents potential premium to BMC stock price achievable upon implementation of Elliott’s suggested strategic and operational

improvements

$43.76

$43.45

9.5%

03/16/12 ¹

Unaffected –

05/11/12 

(Last Trading Day

Before Elliott’s Position in

BMC Stock Made Public)

Current –

06/15/12

(With Significant Support

from Elliott's Buying and

Market Speculation)

Adj. 06/15/12 Stock Price

(Assuming Stock Tracked

NASDAQ and Peers ²

Since 03/18/12)

Target Price Per

Analyst Estimates ³

Mean Long Term

Growth Rate ³

~17% –

46%

~20% –

41%

~29% –

61%

~23% –

45%

2.5%

Operational Improvements

4

Sale of BMC

4

Share Repurchase

5

Potential Dividend Yield From

Initiating Dividend Payments

Separate ESM /

MSM Businesses

4

$38.60

$40.40

$35.73

[

19 ]

[

19 ]

Management’s Same Story Doesn’t Really Fit…

BMC’s Board and management believe they have done well enough to maintain the status quo.

Why should we believe they can execute this time around??

Source:

Company Filings, Capital IQ

1.

Peers as defined in BMC’s proxy filed with the SEC on 06/05/12 and include ATVI, ADBE, AKAM, ADSK, BRCD, CA, CTXS, CPWR, EA, INTU, JNPR, NTAP, CRM, SYMC, SNPS, TDC, VRSN, VMW

2.

Represents average of NASDAQ, S&P 500, and Dow Jones Industrial indices as of 03/18/12, which represents date prior to 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

“For the five-year period ending fiscal year 2012, BMC has

outperformed the S&P500 by 31 percent and the NASDAQ by three

percent. For the 10 year period ending fiscal year 2012, BMC has

outperformed the S&P500 by 92 percent and the NASDAQ by 44

percent”

“Importantly, your Board and management team have proven

themselves to be flexible, adaptable and experienced at capturing the

growth created by new technology waves and building sustainable

stockholder value”

By management’s own admission the Company was late in

entering the SaaS market:

“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)

BMC stockholders saw total returns of -19% and 22% in the last

one and three fiscal years, respectively; meanwhile, BMC’s

peers ¹

generated average total returns of 4% and 133% over the

same one and three year period

“We believe continued successful execution of our strategy and

targeting a highly attractive market will deliver value to our customers

and drive strong financial results and total stockholder returns”

BMC

stock

price

has

underperformed

over

more

relevant

time

periods for stockholders of 1, 2, and 3 years against the average

of market indices ²

by -32%, -26%, and -66%, respectively

Looking back 5 to 10 years ignores the recent underperformance

in the stock price (and, we believe, is an irrelevant self-serving

perspective)

MANAGEMENT’S CLAIMS IN STOCKHOLDER LETTER (6/12/12)

ELLIOTT’S PERSPECTIVE

1

[

20 ]

[

20 ]

Management’s Same Story Doesn’t Really Fit…(cont’d)

Source:

Company Filings, News Reports

1.

Management quote from Wall Street Journal article “Elliott Management Has Taken its Fight with BMC to Stockholders”

dated 06/14/12

BMC has made similar claims since 2009, however, it appears

that management is still struggling to resolve the very same sales

force related issues:

“BMC has made a significant investment in additional ESM direct

sales capacity and adjusted the compensation structure, both of which

we believe will drive growth as the sales force gains additional

experience”

“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)

“Your Board and management team are dedicated to building value for

all stockholders. We are excited about the opportunities that lie ahead

and are confident in our future success”

“In fiscal year 2013, we are targeting ESM license bookings growth in

the low double digits”

For FY2012 BMC’s management originally projected +20% ESM

license bookings growth. In fact, FY2012 ended with a year-over-

year decline in ESM license bookings of 11%

This, to us, represents management’s profound failure to

understand BMC’s underlying business trends and challenges,

and gives us no confidence in management’s ability to predict

future business prospects and performance in the ESM license

business

“We think that we’ve got a very strong and independent Board of

Directors who have proven to be able to grow and to change as the

industry grows. We refresh our Board pretty regularly, and we think

that we can do that using the strategy that we’ve been using.”

¹

“BMC's Director nominees are proven leaders with a diverse range of

relevant business, financial and corporate governance experience

and

expertise, and they have the critical industry knowledge and experience

to continue executing the Board and management's strategy to enhance

value for all BMC stockholders”

MANAGEMENT’S CLAIMS IN STOCKHOLDER LETTER (6/12/12)

The average tenure among the group of four Directors that we

believe should not be elected is over 15 years on BMC’s Board,

much higher than industry norm

Additionally, these four incumbents have executive experience

as a consultant, a government employee from the Federal

Reserve, manager of a recruiting company and a

satellite/telecom background, none of which is directly relevant

for an enterprise software company like BMC

ELLIOTT’S PERSPECTIVE

1

Elliott believes BMC can be a GREAT company –

but the same plan and the same Board is the wrong answer

[

21 ]

The

Same

ESM

Plan

–

Again?!

[

21 ]

2

Source:

Company Filings, Capital IQ

“Reducing turnover is an important element to

increasing the productivity of our direct sales force. In

the

second half of fiscal 2012, we implemented a

new sales leadership structure, increased

investment in our sales employee retention

programs, and adjusted our compensation

practices to ensure that we attract and retain the

best sales talent and appropriately incent them”

–

Bob Beauchamp

(June 12, 2012 Letter to Stockholders)

BMC’s most recent letter to

stockholders reiterates its plan for ESM

After

four

years

of

management

“focus”

on

strengthening

ESM

sales

force, it still remains a major issue

This

is

the

SAME

plan

for

the

last

four

years

BMC management’s plan for ESM has not worked over the last several years and we

question management’s ability to predict the business’

prospects and manage effectively

BMC’s management projected +20% ESM license bookings growth when the year ended with -11%

"Low 20's"

"Mid-Teens"

"Mid-Single

Digits Decline"

"High Single Digits to

Low Double Digits Decline"

(11.0%)

Low Double Digits

Q4 11

Prediction

Q1 12

Prediction

FY 13

Prediction

???

Q2 12

Prediction

Q3 12

Prediction

Q4 12

Actual

($ in millions)

10-Years of organic growth

+ Undisclosed M&A revenue

+ “Growth”

from acquired businesses

[

22 ]

[

22 ]

The Status Quo Growth Plan Hasn’t Worked

Market

entrants

like

ServiceNow

(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

“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 says its Board understands the markets and software –

but many members don’t have relevant

backgrounds and the results don’t bear it out…

Source:

Company Filings, Capital IQ, News Reports, Wall Street Research,

451 Research

1.

FY2002A ESM revenues include other software revenues and exclude

other revenues of $7.9mm

2.

Represents LTM Revenues at the time of acquisition

3.

Includes LTM Revenues of  RealOps, Phurnace, GridApp, IT Masters, ProactiveNet, and Tideway Systems at the time of acquisition

4.

Represents implied revenues from acquisitions and organic growth

to bridge from FY2002A ESM reported revenue and disclosed LTM revenue of acquired businesses to FY2012A ESM  reported revenue

BMC ESM SEGMENT -

LACK OF ORGANIC GROWTH

3

“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)

$706

$1,342

$250

$39

$71

$44

$212

$20

FY2002A Total

ESM Revenue ¹

²

²

²

²

Other Revenue

From Acquisitions ³

Other Revenue

4

FY2012A Total

ESM Revenue

Management’s Plan to Return Capital to Stockholders

4

Despite modest share repurchase activity BMC has historically maintained significant excess cash on balance sheet which presently

earns insignificant amount of interest income

Additionally, BMC generates positive free cash flow which has aided in maintaining high levels of cash on the balance sheet

The excess cash, while providing a safety cushion, arguably earns lower returns than any reasonable return on equity

Elliott believes that BMC can return higher level of capital to stockholders to boost returns without jeopardizing the Company’s

fortress balance sheet

Moreover, opportunity exists to issue debt to buy-back more stock than management’s existing plan in FY2013 “to maintain the level of

share repurchase activity to be consistent with the prior years”

BMC’S EXCESS CAPITAL FOR STOCK BUYBACK

Source:

Company Filings, Bloomberg

1.

Calculated as operating cash flow less capital expenditures and capitalized software development costs

2.

EBITDA 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 amortized software development cost, plus $37.8mm depreciation

3.

Includes long-term borrowings and capitalized leases

4.

Based on Wall Street Research; calculated as operating cash flow

less capital expenditures and capitalized software development costs

[

23 ]

There are opportunities to improve BMC’s capital structure to increase

stockholder  value beyond management's current plan of stock buyback

BMC’S HISTORICAL CASH

FYE March 31,

B/S Cash

Free Cash Flow ¹

2008

$1,351

$487

2009

1,097

484

2010

1,434

532

2011

1,689

627

2012

1,583

641

Average

$1,431

$555

($ in millions)

($ in millions)

BMC has historically generated and

maintained significant cash on balance sheet

We believe that a range of 1x-2x Net Debt / EBITDA

is a reasonable capital structure for BMC

Net Debt / LTM EBITDA ²

1.0x

1.5x

2.0x

Net Debt Capacity

$639

$959

$1,279

Plus: FY2012A B/S Cash

1,583

1,583

1,583

Total Debt Capacity

$2,222

$2,542

$2,862

Less: FY2012A Existing Debt ³

(846)

(846)

(846)

Additional Debt Capacity

$1,376

$1,696

$2,015

Plus: FY2013E Free Cash Flow

4

643

643

643

Total Available Capital

$2,019

$2,339

$2,659

$2,557

$2,418

FY2002A - FY2012A

R&D Expense

FY2002A - FY2012A

M&A Spend ¹

[

24 ]

[

24 ]

The Same M&A Plan is Not the Answer

Source:

Company Filings, Capital IQ,  Wall Street Research, 451 Research

1.

Approximate amount spent on acquisitions between FY2002A to FY2012A

BMC R&D EXPENSE AND M&A SPEND

BMC

has

paid

significantly

high

multiples

for

its

acquisitions

—

27 acquisitions for over $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 significant cash and an inordinate amount of time on extremely small acquisition targets

—

Despite small revenue base, revenue growth has not followed

In addition to M&A, BMC also spends significant cash on R&D

We

question

BMC’s

ability

to

effectively

channel

R&D

and

integrate

its

acquisitions

and

maintain

their

targets’

growth

trajectories

Moreover,

also

calls

into

question

BMC’s

core

organic

growth

as

total

revenue

has

grown

only

at

a

CAGR

of

5%

from

FY2002

to

FY2012

BMC has spent significant amount of stockholder capital on R&D and an M&A strategy which has not

contributed meaningfully to organic revenue growth

($ in millions)

($ in millions)

Approximately $5 billion in

Collective Spend

While BMC’s management has spent ~$5bn on R&D and M&A, revenues

have only grown by $883mm or less than 18% of the capital invested

$1,289

$2,172

FY2002A

FY2012A

BMC REVENUE GROWTH

CAGR of

Only 5%

[

25 ]

[

25 ]

The Same Compensation Plan…

DOES MANAGEMENT BELIEVE THEIR OWN STORY?

4

Source:

Company Filings, Capital IQ, Bloomberg

1.

Metrics as of 03/31/12; Peers as defined in BMC’s proxy filed with the SEC on 06/05/12 and include ATVI, ADBE, AKAM, ADSK, BRCD, CA, CTXS, CPWR, EA, INTU, JNPR, NTAP, CRM, SYMC, SNPS,

TDC, VRSN, VMW

2.

As per BMC’s proxy filing from 06/05/12

3.

Based on Company’s proxy filings. $121.6mm represents total realized compensation

based on LTIP payout, stock option exercises, vested restricted

stock and total cash compensation as disclosed in the

Company’s proxy filings

4.

Based on Company’s Form 4 filings with SEC, between July 2003 to May 2012

BMC’S TSR VERSUS PEERS ¹

1 –

Year

3 -

Year

6

BMC still paid short-term incentives to its CEO and CFO despite a 1-year stockholder return of -19% during FY2012

—

If stockholders lose 19% of their investment, why does management get incentive payments?

BMC’s

CEO

receives

relatively

high

pay

despite

disappointing

one

and

three-year

relative

stockholder

returns

—

BMC

stock

underperformed

peers

by

23%

and

111%

over

the

last

1

and

3

fiscal

years,

respectively

¹

—

Despite

this

significant

underperformance,

BMC’s

CEO

received

total

compensation

around

the

89th

percentile

of

its

peer

group

in

Fiscal

2012 ¹

This

massive

underperformance

has

damaged

stockholder

value,

but

not

for

BMC’s

CEO,

who

received

total

compensation

of

$12.5mm²

last

year and $37.3mm²

over the last three years and $121.6mm³

since 1996

BMC management compensation incentives are misaligned

“Revenue

grew

5

percent

to

a

record

in

its

last

fiscal

year,

...profit,

however,

fell

12

percent

and

license

bookings

-

a

measure

of

future

growth

-

fell

5

percent....Yet

the

board

apparently

felt

the

results

were

strong

enough

to

make

BMC's

chief

executive,

Robert

Beauchamp,

one

of

the

city's

highest-paid

executives,

showering

him

with almost $12.7 million in total compensation”

If the CEO and CFO keep selling and

never buying, do they believe in the future?

Bob

Stephen

Beauchamp

Solcher

(Number of Securities)

CEO

CFO

Grant, Awards and Acquisitions

2,789,770

811,618

Exercise or Conversion

5,860,056

767,600

Sale of Securities

3,403,168

569,959

Purchase of Securities

--

--

(19%)

4%

22%

133%

Peers

Peers

Houston Chronicle (May 24, 2012)

–

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

III. Our Director Nominees are a Better Choice

Elliott Has Proposed to Make BMC’s Board Stronger

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

believe

the

current

resistance

to

new

ideas

and

thoughtful

evaluation

of

all

alternatives

stems

from

a

Board

that

lacks

background

and

insight

into

the

key

issues

BMC

faces

today

—

Moreover,

the

average

tenure

on

BMC’s

Board

among

the

group

of

four

existing

Directors

we

propose

replacing

is

over

15

years

–

much

higher

than

industry

norm

—

These shortcomings render the current Board unable to effectively guide and challenge management to achieve the best possible

outcome for stockholders

We

propose

that

our

four

independent

nominees

join

BMC’s

Board,

as

they

consist

of

respected

technology

industry

executives

with

timely,

relevant

experience

in

areas

critical

to

BMC’s

future

and

who

will

work

to

maximize

stockholder

value

—

While we recognize that our slate would represent a minority of the Board, we believe their experience would enhance the quality

of the Board immensely

—

Our

slate

includes

three

former

enterprise

software

CEOs

–

the

four

incumbents

have

executive

experience

as

a

consultant,

a

government

employee

from

the

Federal

Reserve,

a

manager

of

a

recruiting

company

and

a

satellite/telecom

background

Elliott

believes

that

a

vote

for

BMC’s

directors

is

a

vote

for

the

status

quo

–

the

status

quo

may

be

best

for

the

entrenched

Board

and

management,

but

in

our

opinion

is

completely

unacceptable

for

stockholders

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

greater value through the addition of thoughtful and experienced

technology executives to the Board

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

[

27 ]

[

28 ]

Board Oversight Would be Dramatically Improved with More Domain Expertise

KEY QUESTION

KEY REFERENCE POINTS

Where is the Board’s

Sense of Propriety

as a Fiduciary?

Why, when management failed to set corporate

strategy and failed to execute against its

business plan, has BMC’s Board continued to

lavish management with outsized

compensation?

“Revenue grew 5 percent to a record in its last fiscal year, ....profit,

however,

fell

12

percent

and

license

bookings

-

a

measure

of

future

growth -

fell 5 percent....Yet the board apparently felt the results were

strong enough to make BMC's chief executive, Robert Beauchamp,

one of the city's highest-paid executives, showering him with almost

$12.7 million in total compensation”

[

28 ]

Where is the

Board’s Oversight?

Why has BMC’s Board failed to hold

management accountable for fundamentally

and materially misunderstanding the near-

term prospects for BMC’s “growth engine”

–

its

ESM segment?

“The assumptions underlying our full year fiscal 2012 expectations

include…

ESM license bookings growth in the low 20’s”

–

May

4,

2011

Q4

2011

Earnings

Call

“For fiscal 2012, total ESM license bookings were $506 million,

down 11%

from fiscal 2011.”

–

May

9,

2012

Q4

2012

Earnings

Call

Where is the Board’s

Strategic Guidance?

Why has the Board and Senior Management

failed to anticipate fundamental changes in

BMC’s end markets and customers’

needs and

to either build or buy these key capabilities that

are critical to BMC’s long-term competitive

success?

“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,

BMC

CEO

Q4

2012

Earnings

Call

(May

9,

2012)

BMC’s Board stated as recently as June 19 that management’s incentives are aligned with stockholders. But it

seems like it could be far better

–

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

Houston Chronicle (May 24, 2012)

[

29 ]

BMC Board’s Interests May Not be Aligned with the Stockholders

Outside Director

Years on Board

Shares Owned

Total Beneficial Ownership ¹

Ownership % ²

Meldon Gafner

25

36,378

191,832

0.12%

Tom Tinsley

15

9,403

114,857

0.07%

Jon Barfield

11

5,697

41,151

0.03%

Kathleen O'Neil

10

21,778

202,232

0.13%

Thomas Jenkins

8

7,893

103,347

0.06%

Gary Bloom

5

16,478

79,432

0.05%

Louis Lavigne, Jr

4

16,378

69,332

0.04%

Mark Hawkins

2

9,248

14,702

0.01%

Stephan James

2

12,075

17,529

0.01%

Not only does the BMC Board lack relevant experience, its members also have little vested economic interest

in the performance of the Company

Source:

Company’s Definitive Proxy Filing dated 06/05/12

1.

Total Beneficial Ownership includes shares owned, shares covered

by exercisable options and shares issuable upon vesting of RSUs

2.

Ownership percentage calculated as total beneficial ownership over outstanding common stock as of 05/04/12

[

30 ]

Opportunity to Improve BMC’s Board

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 and

operational alternatives to maximize stockholder value

Moreover the Board Nominees have the requisite experience to help guide management through the

operational challenges they face (e.g. sales force execution and

efficiency, margin improvement opportunities)

CEO and Senior Management experience at leading technology companies (even competitors) provides the nominees

significant operating experience and market knowledge to help the Board engage on BMC’s execution, growth and strategy

today

Timely and relevant experience with SaaS, cloud management and other emerging technology trends to help understand new

platforms impacting BMC today

Significant experience relating to execution and integration of targeted acquisitions (including large transformational

acquisitions) will help BMC’s Board and management consider BMC’s operations in light of nearly 40 acquisitions done

since 1994 and the value-maximizing strategy going forward

Deep

operational

experience

with

sizable

organizations

will

help

the

Board

to

investigate

BMC’s

cost

structure,

efficiency

and how best to maximize profitability while investing for growth

Extensive experience with M&A, sales and divestitures, private equity and leverage will help the Board thoughtfully

evaluate all the pathways available to maximize stockholder value

[

31 ]

Opportunity to Improve BMC’s Board (cont’d)

Executive

Vice

President

of

Sales,

Marketing

&

Strategy,

as

well

as

Executive Vice President 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,

until 2005

Senior

Vice

President

of

Worldwide

Sales

at

Siebel

Systems

(1999

-

2001)

17 years at IBM in various roles, including Vice President of Midrange

Systems, Vice President of Sales, Consumer Packaged Goods, and Vice

President, Sales Operations

M.B.A., with distinction, J.L. Kellogg Graduate School of Management

at Northwestern University

B.S., Biomedical Engineering, University of Illinois

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

Vignette ¹

1.

Former Board affiliation

2.

Advisory Board

"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

Chairman

of

the

Board

(Dec.

2010

-

present)

and

Chairman,

President & CEO (2002 -

2010)

Operating Partner at Golden Gate Capital (since 2000)

Formerly Chairman & CEO of Primis Corporation

Formerly Chief Operating Officer of Medaphis Corporation

Formerly Chief Operating Officer of Dun & Bradstreet Software

B.A., University of South Carolina.  3-time All American and National

Championship Track Team (1974)

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

Inovis ¹

Q2ebanking Software

SnagAJob.com

REPRESENTATIVE CREDENTIALS

BOARD AFFILIATIONS

[

32 ]

JOHN DILLON

Opportunity to Improve BMC’s Board (cont’d)

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

developing Ruby on Rails and PHP applications (2009 -

present)

CEO for Navis, a private company specializing in software systems for

operating large marine container terminals and distribution centers

(2002 to 2008)

CEO for Salesforce.com  (1999 -

2001)

CEO and Director of Hyperion Solutions (1997 -

1999)

Five years at Oracle in Sales Management (1987 -

1992)

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

before beginning his civilian career

M.B.A., Golden Gate University

B.S., Engineering, United States Naval Academy

Senior Vice President of Hewlett Packard Corporation (2006 -

2011),

with responsibility for HP's Professional Services, Consulting and

Outsourcing businesses in North America (2009 -

2011)

20 years in various executive roles at Siemens AG (1985 -

2005),

including CEO and President of Siemens Communications (2004 -

2005), responsible for all of Siemens enterprise, wireline and wireless

business in the United States

Serves on the Advisory Board of leading technology companies,

including Violin Memory and Opera Solutions, a leading provider of

"Big Data" analytics

Served over 10 years on the Board of Directors of leading publicly-

traded and private technology companies

Degree in Business Management from the Ludwig-Maximilians

University in Munich, Germany

ANDREAS “ANDY”

MATTES

Experience as CEO and

Director for a diversified

group of leading publicly-

traded and private cloud

computing, SaaS and PaaS

companies

Centerpointe Community

Bank

Intacct Corporation

—

Leading SaaS provider

of ERP systems

Epicor Software ¹

—

Prior to its sale to Apax

Partners in 2011

Clearwell Systems ¹

—

Prior to its acquisition

by Symantec

TransAct Technologies

—

Global leader in

market-specific

printers for

transaction-based

industries

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

—

Prior to its sale to

Avaya in 2012

Mphasis Ltd. ¹

—

Leading provider of

application

development and other

IT services based in

Bangalore, India

REPRESENTATIVE CREDENTIALS

BOARD AFFILIATIONS

1.

Former Board affiliation

2.

Advisory Board

IV. Conclusion

[

34 ]

[

34 ]

Conclusion

As mentioned in our previous letters to management, we have conducted an exhaustive analysis of BMC and have concluded that

there exists significant unrealized value at the Company

For the last several weeks, we have actively encouraged BMC’s management and Board of Directors to work productively with Elliott

and our Director nominees to explore pathways to unlock this significant value for the Company’s stockholders

Unfortunately,

instead

of

engaging

constructively

with

us,

the

Company's

existing

Board

of

Directors

and

management

team

have

adopted

a

“bunker”

mentality

of

short-sighted

corporate

defense

with

the

goal

of

maintaining

the

status

quo

Such irresponsible behavior does not further stockholder interests

—

Instead, it reinforces our view that BMC’s Board is deeply entrenched and is in critical need of new Directors who will take a

thoughtful approach to value creation

A

vote

for

BMC’s

Directors

is

a

vote

for

the

status

quo

–

the

status

quo

may

be

best

for

the

entrenched

Board

and

management,

but

in

our opinion is completely unacceptable for stockholders

Elliott’s nominees are independent, technology industry veterans with pertinent experience in areas critical to BMC’s future

We

firmly

believe

our

nominees

offer

the

important,

timely

and

relevant

experience

that

the

Board

desperately

needs

Elliott has nominated four highly qualified technology executives for election to BMC’s Board so that the Company

can be positioned to realize its full-potential by exploring all of the available value enhancing alternatives

Elliott and its nominees remain committed to this process and are confident

we can come to a positive outcome for BMC and its stockholders