Sep. 4–Trading in Compuware Corp. stock surged Wednesday as rumors circulated that the Detroit software maker might sell part or all of its mainframe products division.
More than 6.2 million shares — twice the average daily volume — changed hands as speculation on Wall Street grew that a sale is imminent after Compuware President Joe Nathan announced Tuesday that he will resign at the end of the month from the largest high-tech employer based in Michigan.
But the trading did not have a major impact on Compuware’s stock price which closed at $6.40, up 22 cents.
Dennis Gaughan, research director for the Boston-based consulting firm AMR Research, said he heard that Compuware is in some type of sale discussions with Houston-based competitor BMC Software Inc.
Compuware spokeswoman Lisa Elkin said the company does not comment on rumors.
BMC’s spokesman Arch Currid said the same thing.
However, during a one-on-one interview with the Free Press on Aug. 27, Compuware CEO Pete Karmanos Jr. left the door open for a sale.
“There is always a chance that someone will come along and their strategy is to buy some of our products, and if I see the opportunity to do that and use that cash to build bigger and better products, then we will do that,” Karmanos said. “As far as selling the company or having someone take us over, it would be very difficult for anyone to do or for us to find a buyer that would pay the appropriate price. That is really not in the cards.”
Karmanos did not comment Wednesday.
Gaughan said such a sale would allow Compuware to focus on the smaller computer market which is more lucrative than mainframes.
But such a sale would also significantly change Compuware’s business.
Compuware generates sales from two main businesses: hiring out information technology workers to companies, and writing software for businesses that run on mainframe computers, the biggest and most expensive machines, and smaller servers or networks. Some of Compuware’s mainframe products include File-Aid, Abend-Aid, Xpediter and QACenter.
Main frame sales accounted for about 20 percent of the company’s overall revenue of $1.7 billion for fiscal year 2002, ended March 31.
The company also derived $687 million in software revenue from its mainframe sales compared to $164 million from its software sales in the smaller computer market.
Compuware officials have been telling Wall Street the last few years that it sees the smaller computer market as the driver for future revenue growth since the multibillion-dollar industry is expanding at a much faster rate than mainframe sales.
BMC, Gaughan said, would benefit with a wider mainframe product offering.
“They have been facing a lot of pressure in the mainframe market from IBM and others,” Gaughan said of BMC. The company also offers software for various size businesses.
Sameer Bhasin, an analyst at hedge fund Okumus Capital, which owns 14 million shares of Compuware, said he believes a sale of the mainframe business would be good for Compuware.
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