TIBCO Announces Results That Are 'Better Than Worse Than Expected'
TIBCO Software (NASDAQ: TIBX) is the latest software vendor
to report that they are following a new trend in the stock market: reporting
results that exceed lowered analyst expectations. Analysts had expected
TIBCO to earn 3 cents per share, down from the 8 cents per share that
they originally projected. TIBCO had only recently revised its guidance,
on March 7. In the end, TIBCO reported pro forma results of 6 cents per
share, up from 1 cent per share for the first fiscal quarter of 2000.
had pro forma operating income for the first fiscal quarter of $3.5 million,
up from $153,000 for the first fiscal quarter of 2000. TIBCO had pro forma
net income of $12.4 million, up from $1.3 million for the first quarter
of the prior year. According to Vivek Ranadiv, chairman and CEO of TIBCO
Software "TIBCO's fundamental business remains strong. Our customers and
partners are leaders in their industries, our technology is essential
to the success of our customers' business, and our balance sheet is solid.
Despite the slowing economy, we nearly doubled our revenue over the same
quarter last year. We remain critical for our customers' success by providing
infrastructure software that enables them to improve operating efficiencies,
reduce costs and capitalize on new revenue opportunities."
the quarter, TIBCO added 111 new direct customers and announced new or
expanded business with companies including FedEx Corporation,
Chevron, Procter & Gamble, and Delta
Air Lines. In addition, the vendor released 17 new products
or versions of products in the first quarter, including XML Canon/
Developer, TIB/IntegrationManager 2.0 and a number
of new adapters to leading packaged applications.
announcement by TIBCO follows closely on the heels on a similar announcement
by Oracle on March 15. Many other vendors have also met the same
fate. It is becoming impossible for them to predict what confidence level
should be assigned to their sales pipeline since the economy is so skittish.
Perhaps the current environment for software vendors was best described
by Oracle CFO Jeffrey O. Henley, who stated "The U.S. economic downturn
over the past several months clearly affected our revenue and profit growth
more than we anticipated, due to a sharp downturn in completed transactions
in the last few days of the quarter, and the current economic uncertainty
continues to limit our visibility going forward."
Customers evaluating large software packages have a strong advantage at
this point. It has always been true that vendor sales representatives
are under increased pressure to close deals as the end of a quarter or
fiscal year approaches. With the market downturn and the recent tendency
of companies to defer large purchases until later in the year, a substantial
bargaining chip can be gained just by agreeing to sign on the bottom line.
Prospects should be able to negotiate serious pricing concessions from
vendors, including payment terms and licensing and maintenance agreements.
is clear that a savvy customer can negotiate much better terms right now
than a free coffee mug and a tote bag. Some suggestions for further arm-twisting
beyond just getting the product for a lower license cost would include:
"named user" pricing and replace it with "concurrent user" pricing.
This can greatly reduce overall costs over time, especially if many
users are casual and do not spend much time connected to the software.
Vendors much prefer the named user model because it can greatly increase
their profit margin. They will be loathe to eliminate it.
the first year (or more) of product maintenance (generally priced at
15% of product cost, per year).
for free training and on-site classes (beyond what the vendor may already
include) for both end-users and administrators.
the cost of consulting for initial installation and testing.