Business process management specialist TIBCO Software (NASDAQ:TIBX) is reporting results for Q2 2006 tomorrow night. Will the last two months' stock-price nosedive prove reasonable, or has the market overreacted?
What analysts say:
- Buy, sell, or waffle? Sixteen analysts follow TIBCO. Seven of them recommend buying the stock, nine are asking you to just hold on for now, but nobody rates TIBCO a "sell."
- Revenues. Analysts are looking for a 16% year-over-year improvement in sales to $118 million.
- Earnings. The average analyst forecast calls for $0.06 of quarterly GAAP profits.
What management says:
Management comments point to a future heavily dependent on the success of service-oriented architecture (SOA) software, and its potential to steal customers from business management software makers like Oracle (NASDAQ:ORCL) and SAP (NYSE:SAP). TIBCO is a pioneer in the field, and the flexibility of micro-applications that can be plugged together according to business needs does make traditional monolithic management software look rather stale, so there is a lot of promise here.
What management does:
Despite the company's award-winning and highly respected suite of products, gross and operating margins are on a downward slide, thanks to more low-margin consultation and training service revenues and less of the very profitable software license sales.
Don't pay too much attention to the attractive net margins, as they rest on good returns on company investments and the peculiarities of estimated tax payment schedules. For TIBCO, operating margins may be a better indicator of the company's true performance than traditional earnings, and that measure isn't looking great right now.
|
Margins % |
11/04 |
2/05 |
5/05 |
8/05 |
11/05 |
2/06 |
|---|---|---|---|---|---|---|
|
Gross |
75.9 |
75 |
73.2 |
72.4 |
72.1 |
71.7 |
|
Operating |
19.4 |
18.4 |
15.4 |
13.9 |
13.9 |
12.3 |
|
Net |
11.6 |
11.2 |
13.5 |
14.7 |
16.3 |
14.9 |
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:
The rest of the world is gearing up to support AJAX, open messaging, and other technologies that form the basis for TIBCO's SOA platform. With giants like Oracle and SAP moving into TIBCO's domain, the company must continue to crank out excellent software. I'd be very disappointed to see a drop in R&D spending, for example, as that line item really is the lifeblood of a company like TIBCO.
The market has punished the stock lately, ostensibly because of changes to the licensing model at the very end of this reporting period. With that in mind, the reported numbers will be important, but management's outlook for the future is likely to have a greater impact on the near-term share price and, more importantly, the longer-term price. If you're planning to follow the earnings call, the Q&A session should be very informative, entertaining, and important.
Competitors:
- BEA Systems (NASDAQ:BEAS)
- SAP
- Oracle
- IBM (NYSE:IBM)
- Microsoft (NASDAQ:MSFT)
- webMethods (NASDAQ:WEBM)
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Fool contributor Anders Bylund owns none of the stocks discussed here. If you can't remember the Fool's disclosure rules , these companies could probably help you get organized.
