Tableau: The DV Market Just Got More Crowded

Oct.22.13 | About: Tableau Software (DATA)

"You're walking around blind without a cane, pal. A fool and his money are lucky enough to get together in the first place." -Gordon Gekko

While you were sleeping...

MicroStrategy (MSTR) Launches MicroStrategy Analytics Desktop

So, in my last piece on Tableau (NYSE:DATA) shares, I pointed out that the there was a significant risk that the established BI players, as well as the currently recognized pure DV competition, Qlik Technologies (NASDAQ:QLIK) and TIBCO (NASDAQ:TIBX), may seek to undercut Tableau's everyman DV strategy. Well, today we got explicit news confirming that one of the established BI old guard has decided to do just that. MicroStrategy (NASDAQ:MSTR), one of the established BI old guard (and arguably the high end leader), has announced a new DV tool that is… you guessed it… COMPLETELY FREE.

Now, I warned about this before, and today we are seeing it actually happen. Competition has now decided to undercut. Why it took this long? Who knows, but the bottom line is the DV space is about to get a lot more crowded. No surprise considering MSTR generated $600 million in revenue last year and trades at a 17 p/e and $1 billion market cap. All they needed to do was look at Tableau's near $5 billion market cap on $160 million in trailing twelve revenue, and conclude that eliminating the free viewer advantage was a no-brainer.

On a side note, I think this move brings up an interesting point worth considering in this space which I have picked up from industry sources, and it is that Tableau's strategy has simply confused the market. No doubt it disrupted the incumbents and caught them off guard, but reality is that when it comes to buying analytics software with muscle, Tableau's 'anyone can cook' DV product has made demonstrating 'value' more difficult. Thus, to clear up this confusion, the heavy duty guys are now being forced to respond with a free analytics solution. MicroStrategy is the first to do this, but I am sure it won't be the last.

Overall, this is great for the consumer and bad news for the pure play point product DV guys. If everyone in BI starts providing new and easy to use free online viewers for the everyman, what becomes the differentiator for buying licensed analytics tools? My guess is it is muscle to handle the big data deluge as well as a stack of analytical tools that extend well beyond visualization.

How to play this news?

MicroStrategy is priced like it has nothing to do with this space, and Tableau is priced like it will own the whole thing. You don't need to be a genius to figure out what that means. Adding MSTR to the growing list of 'value' opportunities in this space (I have preferred TIBX, but no doubt an even more compelling risk/reward case can be made for MSTR though I need to do a little more work before diving in on that ) to hedge a DATA short position is not such a bad idea.

Disclosure: I am short DATA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.