What the TIBCO Warning Means For Shareholders


Source: Thinkstock

Source: Thinkstock

TIBCO Software Inc. (NASDAQ:TIBX) is a global leader in infrastructure and business intelligence software. The company’s products help optimize inventory and cross-selling products. TIBCO uniquely delivers the Two-Second Advantage, which is a huge success. This allows the ability to capture the right information at the right time and act on it preemptively for a competitive advantage. With a broad mix of innovative products and services, TIBCO has thousands of customers around the globe. Normally I wouldn’t cover the company, but it caught my eye when it warned that its earnings are going to miss. Thus, investors might want to consider getting out of the stock. There are numerous concerns.

It is important to note that the company will report final results for the second quarter on Thursday, June 19, 2014. But they are going to be bad, so the company preempted the news and said “watch out” sending shares to a new fifty-two-week low of $18.20. There is an opportunity to buy at these levels and catch a quick trade back to the $19 level, but as an investor, I’d question a long-term buy here. This is because the results are looking dire.

For the second quarter of fiscal 2014, TIBCO expects total revenue to be in the range of $250 to $252 million. License revenue is expected to be in the range of $75 to $76 million. Earnings per share, (GAAP), are expected to be in the range of $0.00 to $0.01. Non-GAAP earnings per share are expected to be in the range of $0.12 to $0.13. The combined effect of lower-than-expected profits along with the mix of revenue across products and regions is projected to result in a higher than anticipated tax rate on both a GAAP and non-GAAP basis. These expected fiscal second quarter results are preliminary and subject to TIBCO management and independent auditors completing their customary quarterly closing review procedures. But it’s never a good sign when a company releases early like this.

The founder and chief executive officer Vivek Ranadive tried to defend the company but the stock is being crushed. He stated: “After a solid first quarter, revenue fell short of expectations in the second quarter, primarily due to lower-than-expected sales of Spotfire. We again experienced growth this quarter in our core infrastructure and event processing product revenue, but Spotfire sales were less than anticipated. We have several changes under way that we believe will improve Spotfire performance. We also acquired Jaspersoft this quarter, and while not a meaningful contributor to second quarter revenue, it represents an important addition to our analytics strategy going forward.”

While this explanation shed light on why such weakness is expected, it gives me little confidence moving forward. Thus, as a quick regression to the mean trade, it can be bought and sold quickly on a bounce, but for the long-term, I rate the company as a sell given its weakness and the fact that the stock is expensive given its earnings expectations.

Disclosure: Christopher F. Davis holds no position in TIBCO and has no plans to initiate a position in the next 72 hours. He has a sell rating on the stock and a $17 price target.

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