Thursday is third-quarter earnings night for TIBCO Software (NASDAQ:TIBX). The software-as-a-service middleware expert looks like a prime buyout target -- but it's been like that for a long time. Will the big fish bite anytime soon?

What Fools say:
Here's how TIBCO's CAPS rating stacks up against some of its peers and competitors:

Company

Market Cap (billions)

Trailing P/E Ratio

CAPS Rating

Microsoft (NASDAQ:MSFT)

$232.3

13.6

***

International Business Machines (NYSE:IBM)

$156.3

14.2

***

Oracle (NASDAQ:ORCL)

$101.4

17.9

****

Nuance Communications (NASDAQ:NUAN)

$3.1

NA

****

Tibco

$1.3

32.0

***

Data taken from Motley Fool CAPS on Sept. 23, 2008.

Our CAPS players aren't very talkative when it comes to TIBCO's prospects. Though almost 75% of the new ratings in the last three months have been positive, only the bears wanted to share their thought processes. "Smaller, entrepreneurial competitors like [privately held] SOA Software and AmberPoint are eating TIBCO's lunch," said CAPS player jamiebrooks. Hold that thought.

What management does:
All the GAAP margins are shrinking, but the operating cash flow is bucking this trend. Given steady revenue growth, it's up to you to decide whether you care more about accounting figures like net income, or straight cash production. I know where my vote falls, though.

Margin

3/2007

6/2007

9/2007

11/2007

3/2008

6/2008

Gross

74.3%

73.9%

73.2%

72.5%

72.1%

71.5%

Operating

14.1%

13.1%

11.1%

11.0%

9.6%

8.2%

Net

14.7%

11.6%

10.1%

9.0%

7.9%

6.7%

FCF/Revenue

19.8%

18.3%

20.9%

15.5%

18.1%

21.2%

Y-O-Y Growth

3/2007

6/2007

9/2007

11/2007

3/2008

6/2008

Revenue

15.8%

12.9%

12.6%

14.1%

13.2%

14.9%

Earnings

14.6%

(11.5%)

(17.9%)

(24.6%)

(39.5%)

(33.8%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
AmberPoint is a respectable competitor in the service-oriented architecture space, but it's too small to cover the full spectrum of middleware services. Where AmberPoint doesn't grab industry honors, you'll usually see TIBCO donning the gold medal, ahead of biggies like Oracle, IBM, and Sun Microsystems (NASDAQ:JAVA). In other words, I don't think that AmberPoint or anybody else is "stealing TIBCO's lunch" today.

As for the buyout talk, TIBCO CEO Vivek Ranadive likes to think of his company as the Switzerland of business-management tools -- the glue that binds IBM, Oracle, and SAP AG (NYSE:SAP) software pieces together. From that point of view, staying independent makes plenty of sense, no matter how tasty a tidbit TIBCO might be for one of the big dudes in the sector. Ranadive is also the biggest single shareholder in his company. His roughly 2.2% stake doesn't quite give him the final say-so on any buyout offer, but he does have a strong voice in the matter.

So for this report, I'd settle for stabilized profit margins and continued 14% revenue growth with solid cash flows. Any acquisition talks would just be gravy -- and the stock looks cheap today.

Nuance Communications is a Motley Fool Hidden Gems pick. Microsoft is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days. Or just sign up for a free CAPS account to learn more about the fellow Fools who were quoted above. They might have more to tell you!

Fool contributor Anders Bylund holds no position in any of the companies discussed here, though he's often sorely tempted. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.