Another Tibco Software Inc. (NASDAQ:TIBX) earnings report and it’s another miss, another guidance downgrade and another series of expressions of dissatisfaction with its own salesforce. As such, the stock now appears to be at a crucial juncture whereby its guidance is so low that rectifying the execution problems could lead to a significant earnings beat and a rapid recovery. Alternatively these misses could be representative of a market that is structurally changing against Tibco Software Inc. (NASDAQ:TIBX). In this article I’m going to outline what the management has been saying over the last year.
Tibco’s Miserable Year
The story of TIBCO’s performance over the last year is personified in the following chart:
In short it’s been a pretty miserable year for investors, and the failure to beat internal guidance is even worse.
In order to demonstrate this I have compared the midpoint of the previous quarter’s guidance with what actually happened.
Now let’s recall that this guidance has been given at a time when the company would have already been through the larger part of a month within the three month period. Of course this is why stocks react so negatively to earnings misses. As Jack Welch famously pointed out, companies should do everything they can to avoid missing them. A company that continues to miss its own guidance will do damage to its market credibility.
What TIBCO Said
I’m going to run through a summation of the earnings calls this year and what management said on them.
Q1 2012- CEO & President Vivek Ranadive remarked that TIBCO had never seen ‘such pricing power.’ When asked about competitive pressures from its chief middleware competitors International Business Machines Corp (NYSE:IBM) and Oracle Corporation (NASDAQ:ORCL) and specifically if they were bundling middleware in order to undercut TIBCO, Ranadive answered that IBM was its main rival but that he felt ‘very comfortable’ with TIBCO’s competitive position. Later on in the same call SAP AG (ADR) (NYSE:SAP) and Oracle were described as ‘dinosaurs’ competing with old fashioned technology.
Q2 2012- This quarter saw some relatively better numbers, and Tibco Software Inc. (NASDAQ:TIBX) was described as operating under the ‘best of times’ by Ranadive.
However, the guidance wasn’t great, and the problem of US sales execution was cited. The regional trends for Tibco Software Inc. (NASDAQ:TIBX) can be seen in this graph.
When asked about the timing of a turnaround in US prospects, management replied that what they were seeing right now ’is opportunity’ which needed investing in. Later on Ranadive declared that he was ‘very, very confident’ that TIBCO would get back on track as early as the current quarter. The main adjustment was to have the North American sales people reporting directly into a senior level TIBCO VP Murat Sonmez.