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TIBCO Software (NASDAQ:TIBX)

Q1 2012 Earnings Call

March 29, 2012 4:30 pm ET

Executives

Vivek Y. Ranadivé - Chairman, Chief Executive Officer and President

Murray Rode - Chief Operating Officer and Executive Vice President

Sydney L. Carey - Chief Financial Officer and Executive Vice President

Analysts

John S. DiFucci - JP Morgan Chase & Co, Research Division

Brad A. Zelnick - Macquarie Research

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Kash G. Rangan - BofA Merrill Lynch, Research Division

Brent Thill - UBS Investment Bank, Research Division

Raimo Lenschow - Barclays Capital, Research Division

Pinjalim Bora - Piper Jaffray Companies, Research Division

Steven R. Koenig - Longbow Research LLC

Karl Keirstead - BMO Capital Markets U.S.

Yun S. Kim - ThinkEquity LLC, Research Division

Jesse Hulsing - Pacific Crest Securities, Inc., Research Division

Operator

Good afternoon, ladies and gentlemen. I'm Montserrat. Welcome to TIBCO's First Quarter 2012 Conference Call. [Operator Instructions] You can also listen to this call via the Internet at www.tibco.com. Today's call is being recorded, and will be available for playback from TIBCO Software's website at www.tibco.com. In addition, replay will be available through InterCall for one month following today's call by dialing 1 (800) 585-8367 or (404) 537-3406 internationally. The confirmation code is 59620366.

The following conference call includes forward-looking statements which represent TIBCO Software's outlook and guidance only as of today and which are subject to risks and uncertainties. These forward-looking statements include, but are not limited to, forecasts of revenues, operating margins, operating expenses, outstanding shares and earnings per share for future periods.

Our actual results could differ materially from those projected in such forward-looking statements. Additional information regarding the factors that could cause actual results to differ materially are discussed in the Risk Factors section of TIBCO's most recent reports on forms 10-K and 10-Q filed with the Securities and Exchange Commission. TIBCO assumes no obligation to update the forward-looking statements included in this call whether as a result of new developments or otherwise.

This conference call also includes certain financial information that has not been prepared in accordance with generally accepted accounting principles, as we believe that such information is useful for understanding our financial condition and results of operations. For a presentation of the most directly comparable financial measures calculated in accordance with the GAAP and a reconciliation of the differences between the non-GAAP and GAAP financial information, please see our website at www.tibco.com.

The presenters on this call are Vivek Ranadivé, TIBCO's Chairman and CEO; Murray Rode, the Chief Operating Officer; and Sydney Carey, Chief Financial Officer.

I'd now like it to the call over to Vivek.

Vivek Y. Ranadivé

Hello, Mo, and thank you for joining us today. It's nice to be speaking to you again and discussing this first quarter of our new fiscal year. I'll begin the call with summary remarks on our Q1 performance and discuss the broader environment we're seeing before turning it over to Murray and Sydney to discuss details.

We started the year right where we left off and continued our record of strong execution. The first quarter, total revenue came in at $226 million and grew by 22%. License revenue came in at $82 million and grew by over 17%. Non-GAAP operating profit grew by 17% and non-GAAP EPS came in $0.20, growing 25% over the same period a year ago.

For the third year in a row, we delivered accelerating revenue growth in Q1. This was the ninth consecutive quarter of growing EPS by more than 25%, and this was the 15th consecutive quarter of beating consensus EPS estimates.

I have spoken before as to how our event-driven software platform positions us at the convergence of the most significant technology forces of our time, big data, cloud, mobility, social networking and the shift to realtime. For more than a decade of innovation leadership and experience born in the world's most demanding environments, we have methodically assembled a powerful set of products that is truly a string of pearls. Most of these pearls of course were born of our own sweat investment from inside these walls.

For example, our Enterprise Messaging, which moves more messages every minute than Twitter moves in an entire day; our realtime rules engine, which detects relevant patterns amidst the stream of events; our integration and automation chassis, the marketplace standard for 21st century flexible applications; our distributed peer-to-peer in-memory data grid, which enables heterogeneous applications to share, exchange and process data in realtime; and tibbr, the universal desktop that marries all of your people, systems and machines, and instead of you searching for the information, lets the information come find you. These are just a few.

To this list, we have selectively added some additional pearls and carefully woven them into our core. For example, Spotfire, our powerful and easy-to-use and deploy visualization offering for big data, which continues to explode in demand and is fast becoming the spreadsheet of the 21st century; Netrics, our in-memory pattern-matching product, so key in multi-domain master data management; Nimbus, our discovery tool for modeling, managing and operating all of your business processes; our S+, with which we bring the expanded power of statistical modeling to our analytical offerings. We own the very language of statistical modeling with it.

But even more impressive than any of these individual pearls is the various powerful ways in which you can string them together into what I call value packs. The first such value pack is around what we refer to as trigger-based marketing or an event-driven approach to up-selling and cross selling your existing customer base.

Leveraging all our pearls, TIBCO can provide its customers the 2-second advantage or just the right amount of information just a little bit beforehand, and yet still with enough time to actually take advantage of it. It's what we're doing today for MGM Resorts. It's what we're doing today for retailers, grocers, banks, telcos. This is incredibly powerful stuff. The fact is, I'm completely confident walking into the office of any CEO and saying to him or her that we can move the needle on their revenue by 10% to 20%. I am having these types of meetings. Customers are seeking us out. The value we can deliver and command for these implementations is massive.

A second value pack is around operational efficiency. Consider PJM, recently written up in Forbes magazine. PJM is the supervisor and operator of the largest regional energy transmission authority, and manages 56,000 miles of high-power, long-distance lines. In part by leveraging TIBCO technology, PJM is saving an estimated $2 billion per year and has freed up the electric capacity of a Keystone Pipeline. This is what we're doing for PJM. It's what we're doing for insurance companies, life sciences, healthcare, logistics and more.

Third is managing risk and fraud, such as what we're doing for the Department of Homeland Security or Con Ed and their smart grid. What good is it to detect an intrusion after the data is lost or to detect a power outage after it's already occurred. Using our event-driven platform, such problems can be a thing of the past.

In closing, what I would submit to you is this: A lot of our customers are getting bombarded with buzzwords. The truth is technologies and concepts like big data and software as a service won't, in of themselves, increase your revenue. What matters is how you string these technologies and deployment models together to solve the threats and opportunities of the 21st century in a holistic way. Whether it's a grocery chain looking to sell more milk and eggs, an airline looking to streamline its operations or a bank looking to manage fraud, TIBCO has the platform on which such applications can be assembled and built. We're pursuing the largest opportunity in enterprise software. I couldn't be more encouraged by the prospects for our business line ahead.

Now I'll turn it over to Murray.

Murray Rode

Thanks, Vivek. I'll cover some key operating metrics for the quarter, and then turn it over to Sydney. I'll start with our license transaction numbers. During Q1, we had 20 deals over $1 million in license revenue, up from 14 a year ago. We had 102 deals over $100,000 in license revenue, versus 108 a year ago. Our average deal size this quarter was $737,000, up from last quarter and about $150,000 larger than the average last Q1. Our top 10 customers comprised about 22% of our total revenue versus 21% a year ago.

Looking at the geographic mix, total revenue was as follows: Americas at 52%; Europe, Middle East, Africa at 39%; and Asia Pacific and Japan at 9%. Europe was a standout performer this quarter, growing 46% over the same period a year ago. This performance was driven by a variety of factors.

Looking at just our top 10 deals, 5 were in Europe and they were spread across 5 different industries: manufacturing, retail, communications, finance and life sciences. The Americas and Asia Pacific grew more modestly at 10% and 12%, respectively, but we still felt good about the mix and quality of business we closed and feel confident in the momentum in those regions going into the rest of the year.

In terms of our sales capacity, we grew quota-carrying headcount to 258, an increase of 24 over Q4. We had a very strong mix of verticals, with 8 separate contributors of 5% or more of total revenue. For the quarter, financial services comprised 25% of total revenue; energy, 10%; communications, 9%; manufacturing, 9%; retail, 8%; life sciences, 8%; government, 6%; and logistics at 5%.

We saw a dramatic growth in our retail and manufacturing verticals at 111% and 137%, respectively. Our Life Sciences business grew by more than 50%, Energy grew at 32%, and Finance was up 20% over Q1 of last year.

From a products perspective, it was a quarter driven by core infrastructure. The breakdown of the license revenue among our major product families was: SOA 57%, Business Optimization 32% and BPM 11%. This quarter, there was a theme of core platform sales implicit in these splits. SOA grew 22%, driven by some of our core infrastructure products, like messaging, but also with the notable performance from our cloud infrastructure offering, Silver Fabric.

BPM grew 16%, driven mainly by continued ramp in demand for AMX BPM. The business optimization grew 11%. This number actually masks our Spotfire performance, which more than doubled from a year ago, with strong sales, both in the Americas and Europe. The other major product in this category, BusinessEvents, continues to be a key catalyst in many deals, but the particular combination of deals, products and relative revenue allocations this quarter left BusinessEvents with lower revenue. We see both Spotfire and BusinessEvents as very important elements of our platform story and as core growth drivers for our business going forward.

Finally, on tibbr, we closed 26 new deals in the quarter, including a 60,000 seat deployment, which entailed a 20,000 seat Chatter replacement. It's also interesting to note that tibbr really provides access to a new segment of customer types, as well as providing a different and complementary selling model.

Overall, we continue to like the diversification of our business from both a product and vertical market perspective, and we see growing strength in our platform positioning for the TIBCO offerings.

With that, I'll turn it over to Sydney.

Sydney L. Carey

Thank you, Murray. First I'll provide additional details on our financial performance in Q1 and then I will provide comments on our financial outlook for Q2. I'll review our financials on both a GAAP and non-GAAP basis. A full reconciliation was included with our press release, along with an explanation of our non-GAAP measures.

Some key performance data on our first quarter results are as follows: Total revenue was $225.7 million, up 22% year-over-year or 23% on a constant currency basis; license revenue was $82.3 million, up 17% year-over-year or 19% on a constant currency basis; services revenue was $143.4 million, up 24% from last year or 26% on a constant currency basis. Our Professional Services business remained strong with growth of 41% over last Q1. Non-GAAP gross margin for Q1 was 73%, slightly down from last year due to the mix of revenue and continued investment in services.

Non-GAAP operating income was $47.6 million, up $7 million or 17% from the same period a year ago. This resulted in an operating margin of just over 21%. Non-GAAP EPS was $0.20 versus $0.16 a year ago. Q1 cash flow from operations totaled $41.1 million.

Moving down the balance sheet, deferred revenue, including both long- and short-term components, totaled $245 million, up $38 million or 18% from Q1 of last year and up $20 million sequentially over Q4's ending balance. DSO for Q1 came in at 75 days compared to 74 days a year ago. Also, during the quarter, we spent over $67 million in share repurchases, buying back approximately 2.8 million shares at an average price of $24.08. On this point, we are announcing today that our board has reauthorized a soft buyback program for up to $300 million.

Looking forward to Q2, we continue to see a big opportunity ahead of us and so remain committed to our plan of investing for growth. Our guidance for Q2 is as follows: We expect total revenue to be in the range of $240 million to $244 million; we expect license revenue to range between $91 million and $95 million. This assumes a 4% currency headwind over last year; the non-GAAP operating margin is expected to be 23% to 24%. Non-GAAP EPS for the quarter should range between $0.22 and $0.23. Note that this guidance assumes a 28% tax rate. However, this can vary depending on the mix of foreign versus domestic profits. GAAP EPS should range from $0.13 to $0.15 with an assumed tax rate of 25%.

With that, we'll be happy to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of John DiFucci with JPMorgan.

John S. DiFucci - JP Morgan Chase & Co, Research Division

If it's okay, just 2 quick questions. The first one is for Vivek and Murray, and then I just have a follow-up for Sydney. Financial Services and Europe, 2 areas I think a lot of people, including us, are keeping a close eye on because we're hearing that there's some softness from the region in Europe and also, there is some pressure in budgets of financial services this year. But it sounds -- well, you did put up good numbers for both and I just -- I don't know, maybe you can talk a little bit more about that. Is there something -- is there some reason why TIBCO might be able to avoid sort of the macro pressures in this important vertical and region? And I guess, are you selling, similar to how Vivek spoke right from the beginning, are Financial Services really starting to engage more with TIBCO beyond sort of the core messaging that they've always engaged in?

Vivek Y. Ranadivé

Yes, John, you guys kept telling us that we were going to blow up in Europe and everyone was telling us that, so we've put a lot of focus into Europe. And quite honestly, I've said all along that we're not going to make any excuses and we're seeing very, very strong demand for what we're doing. And the catalysts are the same: How you do grow revenue, how do you cut your costs and how do you manage risk. And one or more of those factored into banks and factored into Europe. And with banks, it's gone well beyond messaging. Messaging is just a small fraction of the revenue now. So they're buying more and more of the stock. So we feel very good about it. We feel there was a lot of focus put into Europe, and I think the results show that. And we'll continue to put that kind of focus into Europe and also into the Americas and Asia.

Operator

The next question comes from the line of Brad Zelnick with Macquarie.

Brad A. Zelnick - Macquarie Research

Specifically, the 60,000 seat deal that you did and the 20,000 seat Chatter replacement, can you maybe just talk a little bit about the use cases?

[Technical Difficulty]

Brad A. Zelnick - Macquarie Research

I was just speaking specifically to the comments you made on tibbr, 26 deals and the new deals in the quarter, a 60,000 seat deployment, a 20,000 seat Chatter replacement deal. Can you maybe talk about some of the use cases? I think this segment, for you, is exceeding all expectations out there.

Vivek Y. Ranadivé

Yes, we're absolutely crushing Chatter and the other guys in the market right now. And what people want is something that unlocks all the general systems. And -- are we allowed to mention the name of this particular client? We can't? Okay. But basically, wherever there's things like Chatter out there, they like the concept but they want to be able to integrate into everything else and only TIBCO can do that. Murray, what can we say about it, the 20,000 Chatter replacement?

Murray Rode

Well, it's just that kind of flexibility for the enterprise. tibbr is a platform that both brings in the social media metaphor to the enterprise, as well as bringing with it the kind of enterprise-ready integration and management security features that we offer with tibbr.

Vivek Y. Ranadivé

Yes, and this was situation where they had -- they were a big sales post customer, they had 20,000 Chatter seats. And when they did the technical evaluation, it was a unanimous decision to replace it with tibbr. So we think this opportunity is huge, I've said that I'd like to have -- I believe in the next few years, I'll have 10 million seats. I think that's a small number. I'd like to see 100 million seats in the next few years.

Brad A. Zelnick - Macquarie Research

That's helpful color, Vivek, and it's consistent with what we're hearing from the field. There's a lot of excitement around tibbr. If I could just follow-up with Sydney and Murray, as I think about your margin guidance for next quarter, and I look at the success in the services line, obviously, with the success that you're having on the professional services side, the gross margin on services is coming down. But can you maybe just talk about the model going forward, how much do you continue to invest there? And also, as I think about margins, and this is maybe more for Murray, if I look at your productivity of sales and marketing, whether I look at sales and marketing as a percentage of license revenue or even if I look at license revenue per rep, you've been trailing. Using rep count from 2 quarters ago, assuming a productivity ramp, it looks like you're not seeing the same kind of improvements that you were seeing, for example, in the course of last year. And just curious, I know you did away with license quotas a year or so back, what is changing, if anything, in the go-to-market and how should we expect that to play out this year?

Sydney L. Carey

I'll start off on the first part of that question on the services side. We are continuing to make investments in services, both in personnel and facilities. We see a strong demand for our services. And as I've said before, we like services revenue, we like to be out there with the customer and it's profitable revenue for us. We do see a little bit of a hit to our gross margin due to mix of revenue. Professional services in the period was closer to 37% of the total services number versus 33% a year ago. So we're seeing that impact in margin. But we do like to be out there in our customers and driving professional services revenue. Murray?

Murray Rode

Yes, and I think from a sales efficiency and quota head attainment, we're actually pretty pleased with the way salespeople are ramping. We have hired a lot in just the first quarter, kind of exiting last year and into the first quarter this year. So that will take a little bit of time to ramp those sales heads up. But I think in the past, Brad, a lot of the capacity had actually been added some time back. So you saw the uptake happening on capacity that's been added earlier. So I think the trend's similar, and we're good with the way that the new heads are starting to ramp.

Vivek Y. Ranadivé

Yes, I think we're actually very pleased with how that's working out for us. We were conservative in hiring salespeople and we started ramping that up. So we have, if you look at the aging of our sales population, it's newer people -- it's more newer people as a percentage than we've ever had in the past. But the attainment levels are also very high. And so, we're kind of gearing the company up for the $2 billion mark. And for that, we need to hire people. We're very pleased with their attainment. And we've also learned how to do the sales enablement, how to train people. We made the selling process a lot easier. So all of the metrics are very, very positive from our perspective.

Operator

Your next question comes from the line of Derrick Wood with Susquehanna International.

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Murray, you mentioned that the theme of the quarter was platform and we're hearing of the FTL messaging product starting to see some new demand outside of kind of the core capital markets area. So I was hoping you could talk about where you're seeing demand, what kind of projects is this getting pulled into, and how people are thinking of the service bus as a platform for big data-type projects.

Murray Rode

I think we're seeing the kind of platform idea manifest itself in a variety of ways. If you think about Vivek's comments right at the start of the call, those 3 areas of generate more revenues, streamline operations or cut costs and manage risk and compliance plays out across multiple industries. So we certainly see that in finance. And an element of that can -- an element of that involves FTL, primarily if you think about generating more revenue and reducing costs, FTL has a role to play in both those kinds of scenarios.

Vivek Y. Ranadivé

So what -- James, what we're seeing is that our customers are very, very responsive and we walk in and say, hey, we'll grow your revenues down at 20%, and they look at how we can do it. We show them a demonstration and they're absolutely blown away. So what we're doing is we're taking the platform and then we have these 3 value packs that we position, and each of them is received very, very positively. Now it's not to -- we'll still -- we'll sell the full necklaces and we'll still also sell the individual pearls, but you need these pieces. You need low latency if you need -- if you want to have a response while you're on the website or while you're walking through the aisle of a store. And so all of these things play together, and they come together in a fashion that -- it's just unbelievable, the value that's created, and nobody can touch us.

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Yes, I mean, it certainly seems like a compelling value proposition, and it is a platform that partners can, I imagine, come and build practices upon. So could you just touch on what's going on in the partner channel and what efforts you have to drive growth there?

Murray Rode

Sure. We saw, again, in the quarter, good activity from partners. We had about 20% of license revenue related to either direct or sourced partner deals. So our activities, in terms of ramping our personnel that deal with partners and our programs around partners, continue to do well. And I think exactly as you say, the platform story resonates, particularly with the SI partners, around the kinds of practices and even their own versions of the value packs that they can build around the platform.

Operator

Your next question comes from the line of Kash Rangan with Merrill Lynch.

Kash G. Rangan - BofA Merrill Lynch, Research Division

Maybe I'm misreading this, but the long-term deferred revenues were up very significantly. I'm not seeing a long-term deferred revenue increase of this magnitude for Q1. Just maybe you could just fill us in on if there's any license component now. So I think that you recognized a big slug off the big contract in your Q4. So if I X that, what looks to be $8 million to $9 million, it looks like your Q1 seasonality was much better than what it has been in the past. There's something changing about the shape of your business. It looks like your visibility and backlog ought to better. So I know it's a bunch of a couple different things, but I'm wondering if I could get some insight. And of course, I cannot leave without asking a question of Vivek. Vivek, we write about big data, talk about it. I'm wondering if that comes up in the topic of your customer conversations in one way, TIBCO is the longest ending big data company because of your messaging legacy, but how is it resonating in terms of business flows for you guys? Is it just a buzzword that's out there or is it actually driving business? And if so, which parts of your business are feeling [ph] the big data impact?

Vivek Y. Ranadivé

So, Kash, I'll answer your question and then I'll hand it over to Sydney to answer the earlier question you asked. But our customers are simply blown away because we don't really use buzzwords like big data. We just show them what we can do for them. And so we used the example of MGM Resorts, which is a casino company. And we showed them what we could do, and it's really with big data. But when we're talking to the board and the CEO, we just show them exactly what the user experience would be and how they'd be up-selling, cross-selling their millions of customers. And of course in order to do that, we have to be able to analyze big data. We have to analyze it in real time, data in motion tied back to the data address. And then make it actionable so you can actually do something with it. And so, we're just seeing -- the other thing we have done, with this whole big thing that nobody else has done, is we're also incorporating social data. And we're also doing this with my basketball team. So somebody could tweet that they had cold pizza at the last game. And we're going to factor that in into when and what we offer them. And so when we can show these kinds of things, they're simply blown away. And of course, we have to solve -- what we're doing is solving and taking advantage of big data in order to be able to do all of this. But we're just positioning it as a simple trigger-based marketing value pack, where we can up-sell, cross-sell customers to a very large extent. And if you look at the companies that are doing this, have done this, like Macy's, they did this with us, they've had huge success. But anyway, Sydney, I'll hand it over to you in terms of the deferred revenue question.

Sydney L. Carey

Sure. We did see an uptick in our deferred revenue total but in particular, our long-term, we saw several multi-year maintenance renewals, as well as we saw multi-year hosted revenue come into that category. That's primarily related to Loyalty Labs and tibbr. We're still seeing the bulk of the deferred being maintenance, we haven't seen much change in that. But as we're starting to see our hosted offerings, which we count as services revenue not license revenue, we're starting to see that they're taking a little bit bigger portion of the deferred as well.

Vivek Y. Ranadivé

Yes. So basically, Kash, what you're saying is true, that some of that is because of what we're calling services as really hosted license.

Operator

Your next question comes from the line of Brent Thill with UBS.

Brent Thill - UBS Investment Bank, Research Division

Vivek, you've seen a really nice increase in deals over $1 million, I was curious if you could just give us your view on the pipeline, what's causing these deal counts to jump up, and I had a quick follow-up for Murray.

Vivek Y. Ranadivé

Yes, we've never seen such pricing power. So when we walk in and talk about these value packs and about the kind of things we can do, nobody can do it. And so that's allowing us to get value for our software. And it's just simple things, like if you wanted to, if you're a store, and you want to know if there's a medium blue shirt, how do you find that out? You can't go into a database and look for it. You need ActiveSpaces for that. So we're just seeing that we're able to translate these technologies, these pearls, into pearl necklaces where it translates into clear value for them. And so by doing that, we're able to command a value. And we still think that we could get a lot more. We're still, I think, at the lower end of the value that we could be getting for this. So we're pleased at the way that the numbers have come out.

Brent Thill - UBS Investment Bank, Research Division

And just a quick follow-up for Murray. On the direct quota-carrying reps, you're up 24, which is a good start. Is your goal still to get to kind of mid 270s by the end of Q2?

Vivek Y. Ranadivé

It is, it is. That's still our goal.

Operator

Your next question comes from the line of Raimo Lenschow with Barclays.

Raimo Lenschow - Barclays Capital, Research Division

The question I have was around the Spotfire. Obviously, your optimization business had very tough comps and you still managed to grow that. That Spotfire is really standing out here. Can you talk a little bit about the use cases that you see, obviously, the other guys in the field like Click, et cetera, also grow, but are you kind of running against them and can you try to help differentiate the offerings to us a little bit?

Vivek Y. Ranadivé

Yes we're, again, we're killing -- we're replacing Click at more and more places. And so they're more of a departmental solution. They can't scale and they don't tie-in the rest of the stack. So it is becoming kind of the 21st century spreadsheet, where it becomes kind of a discovery tool for what you can -- what patterns you can see in a very visual fashion. This is arguably the next generation of BI, and it's probably the fastest-growing segment of the enterprise software sector right now. But Murray, you probably want to add more on this.

Murray Rode

I think that point about data discovery is really at the core of it. There's a couple of other things, too, we saw in the quarter. First, Spotfire did continue to do very well in its core verticals and kind of core deployment scenarios or use cases, where you're looking at a lot of complex data. But we're also seeing it do much more -- or be used much more broadly for data discovery in other industries like energy and manufacturing, which were also very strong, in addition to life sciences, very strong verticals for Spotfire in the quarter. So it's that combination of it being able to be used in very sophisticated scenarios to find patterns, as well as much broader adoption across a broader range of use cases as a more generalized kind of data discovery tool.

Vivek Y. Ranadivé

Yes, so it's strong enough for a PhD cancer researcher to look for drug cures for cancer on the one hand. At the same time, I can have, basically, people at the high school education use it to find patterns. And in terms of my team, who's buying merchandise and who's buying tickets and what area codes are they coming from and why can't I sell the guys buying merchandising tickets and vice versa. So it's an incredible tool and I believe that everyone will be using this tool in the future.

Operator

Your next question comes from the line of Mark Murphy with Piper Jaffray.

Pinjalim Bora - Piper Jaffray Companies, Research Division

This is Pinjalim sitting in for Mark Murphy. Just wanted to ask you that we hear from TIBCO's partners that TIBCO’s doing good competitively, I head this last quarter end. But competition is getting fierce, especially around the SOA product line, and we hear a lot about bundling tactics by the giant vendors, like IBM and Oracle, already give the middleware for free. Just wanted to know your thoughts on how TIBCO is competing in such circumstances.

Vivek Y. Ranadivé

Our competitive posture has never been stronger. We are in a stronger competitive position than we've ever been as a company. IBM is still the main competitor for us, and there are occasions where IBM will put pressure through bundling and board relationships. And there was one instance I was involved with a Canadian bank and they went with IBM and then 3 months later it didn't work out so they called us back in. And now they have standardized on us. So we feel that our value proposition is so compelling and we promise to get the first results in 90 days. That's something that IBM and Oracle, they can't even do the demo in 90 days. And so we believe that while they are big and strong competitors, we have the answer and we feel very comfortable with our competitive position.

Operator

[Operator Instructions] Your next question comes from the line of Steve Koenig with Longbow Research.

Steven R. Koenig - Longbow Research LLC

I'd like to ask about analytics here. Competition between SAP and Oracle seems to be heating up in this area, whether it's differentiation through these engineered systems or in-memory technology. Vivek, I'd love your comments on how does this affect TIBCO. Does it impact Spotfire, could it help TIBCO? Then I have one quick follow-up, if you don't mind.

Vivek Y. Ranadivé

Yes, they are basically 2 dinosaurs competing with 20th century technologies. And so they end up -- so we have instances where an Oracle customer has had to buy our analytics package of business optimization of Spotfire and BE, and then we also have instances of SAP customers doing that. So they are still very much competing. Now we've also, from our perspective, we'll talk to -- in the case of, I think, Macy's, we talked to Exadata, and then there's other cases where we'll happily talk to HANA. So we're neutral, we'll work with all these guys. But we really are the icing on the cake. And so without things like Spotfire and BusinessEvents, you're really looking at things after the fact, and it's of limited value.

Steven R. Koenig - Longbow Research LLC

And if I may, I'd like to ask about your strength in Europe. We had someone of your size point [ph] the strength in telco deals there. I'm wondering, bigger picture, for what you guys saw with -- the bigger visibility. What verticals were strong, what drove it? Was it the number of deals, size of deals, et cetera?

Vivek Y. Ranadivé

Yes, we saw strength across the board. And so if you look at some of the deals, they were like the 5 big deals were 5 different markets. We have a very strong leadership team in Europe. They're executing well. And the opportunity is huge for us. We have no -- you're not going to hear us make any excuses about anything over there.

Operator

Your next question comes from the line of Karl Keirstead with BMO Capital Markets.

Karl Keirstead - BMO Capital Markets U.S.

I've got 2 questions. Vivek, I'm wondering if you could comment on BusinessEvents. Obviously, the year-ago was very tough, but the math suggests that the license sales for BusinessEvents must have been down year-over-year. Is there anything else going on worth highlighting outside of a tough comp? And then perhaps for Murray I've got a second unrelated question. If you look at the guidance, it suggests that the services revenues would be somewhere in the order of about $149 million for the May quarter. That's more of a low-double digit revenue growth despite the investments you're making. I'm wondering if you could explain that for us.

Vivek Y. Ranadivé

Yes, so we're seeing great strength in BusinessEvents, it's a catalyst for just about everything we do. Yes, the comp was -- it was a big number a year ago. But I think a lot of it is also, when we sell a pearl necklace, it's hard to decide what value you allocate to any pearl, and it could be a situation where the client has bought something, some of the pearls. And so when you're selling the necklace, you can't charge for those pearls. So I wouldn't put too much weight on that. We're seeing a shift where we are even seeing, actually, people starting to look at BusinessEvents as kind of the 21st century app server, where if you wanted to look at things in and out of databases, when you were looking at an app server for static data. So for moving data or for events, as we call them, you need an event server, and that's what BusinessEvents are. So we're seeing very, very strong demand for that. But increasingly, we're selling it in conjunction with the other pieces as part of the pearl necklace. Sydney, I'll let you comment...

Sydney L. Carey

Yes, I'll comment on the guidance on the services growth. We are seeing that, going from quarter-to-quarter, we had good Q1 this year, we had some additional days in this quarter on a year-over-year basis. We had a very strong Q2 last year in services. Currency is also playing a role in the growth rate, we're seeing about a 4% headwind on currency and services as well.

Operator

The next question comes from the line of Yun Kim with ThinkEquity.

Yun S. Kim - ThinkEquity LLC, Research Division

First, a quick question for Murray. ASP was up pretty meaningfully in the quarter, was there a 1 or 2 large deals that skewed the metric or are you simply seeing bigger deals out there?

Murray Rode

Well, we saw -- in terms of top 10 customers, it was pretty similar to past quarters. We did have a couple of deals $5 million or greater. And it was a little bit more of a -- a little bit more of just larger deal sizes across the board this quarter. But I think as Vivek was pointing out, it was more of an indication of pricing power and kind of recognition of value in the deal mix.

Yun S. Kim - ThinkEquity LLC, Research Division

And Vivek, as you indicated, there's a lot of talk about big data and in-memory computing technology out there. Can you give us your thinking regarding how TIBCO's products fit specifically into the in-memory computing technology trend that’s going on, how important is in-memory computing technology in terms of enabling your two-second advantages vision. Is it fair to say that the adoption of in-memory computing technology out there should help TIBCO?

Vivek Y. Ranadivé

Well, yes, the thing is, Yun, you know that I've been talking about this for many years, both about big data and in-memory. So in a way, we were way ahead of the game. And when our customers talk to us, they are not -- they're not using those words necessarily. They want to know whether there's a blue shirt in a certain size available from any store. And you can’t do that with the old database, old model of doing things. And so, ActiveSpaces in-memory computing is just a massive opportunity. I see that, over time, things like Teradata will be under threat, because people will increasingly move to in-memory. If you're in a website and you click on a player, David Lee. I want to sell you a shirt while you're there. So really, there's no other way to respond to the market needs today. There's no other way to do the trigger-based marketing that we were talking about. And the world is just going to shift rapidly over the next 5 years to in-memory and we are in pole position. The other point I want to make is the guys who try to do it in-memory, if you just put the same database model in-memory, you're just paving a cowpat. So you still have a request-reply model, that's like pouring asphalt in front of a cowpat. There's not much value. And so what we're doing is basically event-enabling it, which is completely different -- much greater value. So we're very excited about this movement to in-memory and we will be the greatest beneficiaries from it.

Yun S. Kim - ThinkEquity LLC, Research Division

And then Sydney, real quick, the ramp on the professional services business, is that accelerating or just growing at a steady rate? How should we think about the services margin going forward?

Sydney L. Carey

Well, we've been making investments in headcount, we'll continue to do that. So I would look at our gross margins to be down from where they were last year, but then throughout the year, start to come back as we get the productivity up for those new hires.

Operator

Your final question comes from the line of Rob Owens with Pacific Crest Securities.

Jesse Hulsing - Pacific Crest Securities, Inc., Research Division

Jesse Hulsing in for Rob. You mentioned strength in Silver Fabric, are you seeing a broader trend, though, of private cloud deployments? Can you talk a little bit about the trends there?

Vivek Y. Ranadivé

Yes, what we're seeing is people are really wanting these hybrid clouds, where I don't -- I have yet to see a customer where they're just going to take everything and put it into a public cloud. I'm not seeing that. We have 4,000 customers and I've not seen a single customer. So we're the enabler for that private, that hybrid cloud. And so -- and that's really whether we have the tools with which people can systematically cloudify. But I don't know, Murray, do you want to add to that?

Murray Rode

Only that this is the second quarter -- we saw good strength from Silver Fabric in Q4, and again, saw a strong quarter this quarter with Silver Fabric either being core to what a customer was looking for or an important part of the overall value proposition for the customer.

Vivek Y. Ranadivé

Okay, we'll now conclude this call. Thank you, all, for joining us, and have a good day.

Operator

Thank you for joining us. We now conclude TIBCO's Q1 2012 earnings call.

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