Update: TIBCO Software Earnings

Sep. 22, 2014 7:40 AM ETTIBCO Software, Inc. (TIBX)

Summary

  • TIBCO Software reported Q3/2014 earnings that disappointed investors.
  • Weak quarter and forecast confirms opinion that business still under pressure.
  • Turnaround was slower than expected.

TIBCO Software, Inc. (NASDAQ:TIBX) reported quarterly revenue that fell. Software revenue fell faster than subscription revenue growth. This led to a 17 percent drop in the segment. Software revenue, which contributed to $77 million of the $260 million, dropped 27 percent compared to last year. Though shares were propped up from management taking steps to find a buyer, operational weaknesses persist. With SAP AG (SAP) buying Concur for $8.3 billion, it takes away a potential suitor and makes it harder to support TIBCO's recent stock rally.

TIBCO's operational weakness was as expected. Gross margin (non-GAAP) fell to 71.6 percent, compared to 73.6 percent last year. Net income fell 37 percent to $41 million. International sales were weaker than expected. It now appears the sales team's performance improvement will need more time. Spotfire sales improved slightly better than expected, as 22 customers signed up for subscription contracts. TIBCO added features and simplified the user interface for Spotfire during the quarter. This should help improve sales. TIBCO's participation at the Teradata Conference and Expo on October 15 2014 should also help promote Spotfire.

The weak quarter was expected, because subscription revenue growth takes time. The uptake for Jaspersoft and Spotfire is also slow but expected. Updates to the product should help TIBCO accelerate revenue growth. The sell-off (by 10.5 percent in the week) in shares by investors is justified, though the stock held its takeover premium well over the last two months. Now that the stock is trading at $19.36, the downside is much lower. A buyer may emerge, offering a 20 - 25 percent premium. In the interim, management needs to motivate staff while downplaying the potential disruption of a buyout. Consistent maintenance revenue and growing subscription revenue should help support the stock price at current levels.

This article was written by

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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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