Business-software maker TIBCOSystems
The company's new enterprise licensing model had deflated its share price in recent weeks, prompted by analysts' fears that TIBCO's discounts on large contracts cut too deep. But the management team spent its conference call hammering home the stability of its future software licensing revenues, and the growth in the overall service-oriented architecture (SOA) market, where traditional business-management software is being replaced by a conglomerate of smaller, more flexible components.
For the just-completed second quarter of its fiscal 2006, TIBCO reported GAAP earnings of $0.11 per share, up from $0.10 last year, and well above analyst forecasts around $0.06. Revenues grew 20% year over year to $121 million, fueled by increases in both licensing and service sales. The higher-margin license business expanded slightly, and costs in the service division were kept down, creating a nice pop in gross margins both sequentially and year over year.
TIBCO's gross efficiency also trickled down to operational profits, as its long slide in trailing-12-month operating margins finally ended with a slight uptick to 14%. It's not operational perfection, but it is an encouraging sign that the management team seems ready for further improvement.
To capitalize on the perceived opportunities in its core market, TIBCO plans to spend more on sales and marketing over the next few quarters; its sales staff should grow by 20% in the next quarter. When asked about competition from Oracle
The upcoming quarter should look slow because of seasonality. The company's Q3 guidance calls for roughly $0.06 in earnings per share, on revenue between $118 million and $122 million. However, TIBCO has regularly exceeded its own guidance in recent quarters. That track record suggests that the company's $50 million to $54 million Q3 licensing revenue forecast isn't horribly inflated, putting a lot of the fears about deep discounts in that department to rest. I see no reason why TIBCO's stock shouldn't be able to climb back a bit from here, and keep building a strong brand for the future.
Further Foolishness is just the tip of the iceberg:
- See what this Fool thought TIBCO could do.
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