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Shares of Tibco Software (TIBX) lost almost a fifth of their value over the past trading week. The provider of middleware and infrastructure software reported its preliminary fourth quarter results on Tuesday after the market's close.

Fourth Quarter Results

Tibco Software expects to generate $292-$295 million in fourth quarter revenues. The company will report its final results for the quarter on the 20th of December. License revenues are expected to come in between $135 and $136 million. Current analysts' consensus for fourth quarter revenues stands around $316 million.

Tibco expects to report earnings per share of $0.26-$0.27 per diluted share. Non-GAAP earnings are expected to come in between $0.37 and $0.38 per share. The non-GAAP earnings guidance falls short of consensus estimates of $0.44 per share.

Full year revenues will come in between $1.02 and $1.023 billion. For the full year, Tibco will earn $0.69-$0.70 per share on a GAAP basis, while non-GAAP earnings are expected to come in around $1.10-$1.11 per share.

CEO and Chairman Vivek Ranadive commented on the results:

"After 17 consecutive quarters of consistent results, I am disappointed that we fell short this quarter. We, however, strongly believe that our business prospects are as robust as ever. It has been our philosophy to be a 'no excuses' management team, and the fact is that we could have done better executing in our core infrastructure business, particular in the Americas."

Valuation

Tibco ended its third quarter with $675.5 million in cash and equivalents. The company operates with $557.0 million in short and long-term (convertible) debt, for a net cash position of $118.5 million.

The market currently values the firm at $3.3 billion, which values operating assets at roughly $3.2 billion. Based on the company's own full year outlook, shares are valued at roughly 3.1 times annual revenues and roughly 28 times annual earnings.

The company currently does not pay a dividend.

Some Historical Perspective

Year to date, shares of Tibco have fallen roughly 15%. Shares steadily rose from $23 in January to year highs of $34 in April of this year. Shares fell during the summer and, in recent weeks, continued to fall to year lows of $20 at the moment.

Shares of Tibco rose from lows of $5 in 2009 to levels in the low thirties in 2011 and 2012. Between 2009 and this year, revenues rose from $621.4 million to little over a billion.

Investment Thesis

The fourth quarter guidance implies that fourth quarter revenues will increase 15.1% compared to third quarter revenues of $255.0 million. Traditionally, the fourth quarter has been the strongest quarter for Tibco. The guidance assumes that revenues will only increase by 1.4% on an annual basis. In the third quarter, revenues still grew 11.3% on an annual basis.

The company partially blames the external environment, but also recognizes the underperformance of itself. Super storm Sandy, and a government spending pullback ahead of the fiscal cliff discussions, had a "real and tangible" impact. Tibco recognizes that it could have done better in the core infrastructure business, notably in America. In June, Tibco already fired the head of the US infrastructure business.

It has been April since I last took a look at the prospects of Tibco. Shares traded around the $30 mark after the company reported its first quarter earnings. At the time, I was not a buyer of shares, after the disappointing margin developments. I argued that there was a greater chance for an immediate correction. Shares have fallen roughly a third from that point in time.

Despite the more appealing value, I remain on the sidelines, given the poor recent operating performance. The valuation of 3 times annual revenues and 28 times annual earnings is a little rich given the significant growth slowdown.

Source: Tibco Software - Revenue Growth Is Slowing Down On Poor Infrastructure Performance