The rise of big data has taken the market by storm, and when most investors discuss the space, topics revolve around Tableau (NYSE:DATA). Meanwhile, Tibco (NASDAQ:TIBX) is the undisputed leader of big data, and in an interview with CEO Vivek Ranadive, he talks everything from the future to the past and how his company measures against Wall Street favorite Tableau.
Brian Nichols: How does big data help companies in the real world?
Vivek Ranadivé: There are many good examples. One of our customers was dealing with credit card fraud and wanted to be able to detect if someone was using a stolen credit card. We used our visual analytics data tool and found that if you bought razor blades, champagne, and diapers that it was most likely purchased using a stolen credit card.
Nichols: How is this knowledge possible?
Ranadivé: This is what I like to refer to as math trumping science. There is so much data available today that you don't really need to know the whys, but rather the whats, or the pattern, which then explains the why. Razor blades and champagne are both big-ticket items and easy to pawn, while diapers might be purchased to avoid suspicion, as you wouldn't think this person would be stealing.
Nichols: In what industries is big data relevant today?
Ranadivé: Data is all around us, and important in all industries. In energy, we can look at data and know what energy will be needed where, and when. We can then redirect that energy and prevent waste. Data can be used to find cures for cancer, such as which combinations of drugs will provide the best results for certain people.
Nichols: So, where does TIBCO fit into this equation?
Ranadivé: There are two types of data, slow and fast. What makes TIBCO unique is that we're the only company that can utilizes fast data, which helps our customers make an offer to their consumers before they leave the store, rather than six months afterwards. However, not all big data is the same; slow data is keeping information stored and then using it at a later time.
Nichols: Where does Tableau come into play? I assume it's slow data.
Ranadivé: Well, Tableau's kind of a toy, in that it's not real-time and is not predictive. People can buy it using their credit card, but it's not enterprise-ready. In order to enter the enterprise space, you must have security, which Tableau does not possess.
Nichols: Obviously, Wall Street values Tableau as a next-generation, ahead-of-the-curve company. How do you explain the disconnect in market capitalization between TIBCO and Tableau, especially considering your explanation of fast versus slow data?
Ranadivé: I think it's astonishing that a company that brings in very little revenue and does not operate in real time has a market cap that is larger than TIBCO. But, I've seen this before. When I started TIBCO, there were all these single-product companies that had huge valuations, but I can think of 19 companies who competed against TIBCO and all are gone. So, I think there is a huge discrepancy between our valuation and Tableau's. We're an enterprise company, but at the same time, our product is easy to consume. Our Spotfire business alone makes way more money than Tableau, and is roughly the same size.
Nichols: In talking about Tableau and its initial growth, it's about 25% more valuable than TIBCO, yet TIBCO has four times more revenue. Given the fact that big data is a growth industry, at what point in the business cycle does explosive year-over-year growth become more difficult to achieve?
Ranadivé: I think they could probably get to the $350 million mark easily based on the size of the market, but then it's going to start tightening up really fast. At that point, we will also start hitting them hard -- we have a history of doing this -- because we can underprice them. Those who use our product say it's superior and just as, if not easier, to use. But, what's not easier is to pay for it. So, if we make our products easy to purchase off a credit card, then we can block their growth. At this point, they are basically buying business, spending so much money, that it's hard to call it real growth. I also think this business model will start catching up with them in the next 12 months.
Nichols: This may be a tough question for you, but if you had to pick one area where Tableau is executing better than TIBCO, where would it be?
Ranadivé: Tableau made it very easy for customers to buy their product, but in some ways they have made my business more valuable.
Nichols: In saying that, and in discussing Tableau's easy-to-consume product, is TIBCO now in a position where you are ready to cut prices, or shy away from the enterprise business?
Ranadivé: Absolutely, and we will, but we also have to be tactful. We have customers that have millions of dollars invested into data, becoming the backbone of what they are doing. So, we have to make sure that all pieces fit together so when we offer a low-end product to purchase off your credit card, we're not creating unhappy customers on the high-end in the process.
Nichols: Do you think your stock price would be higher if you had IPOd last year, instead of being a 15-year veteran to the market?
Ranadivé: Well, based on Tableau's stock alone, our valuation should be double what it is.
Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Tibco Software. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.