I have had a lot of interest in the original post and requests to do a follow-up once the figures were out, so here we go. However, please remember that these are only my personal opinions – I am a market expert, not a financial one!

Revenue declined 9% year on year, although perhaps half of this decline might have been currency fluctuations, and through smart cost cutting measures TIBCO has actually improved profitability. However, from my perspective the most important information was that new license revenue fell to 44.8M from $57.7M in the same quarter the previous year – a 22% fall. Services and maintenance was flat at $88M.

The fall in new licenses is quite dramatic, and certainly not attributable to currency. Of course, this may reflect the generally poorer conditions, but it will now be extremely interesting to see how some of the other SOA and BPM players do in their first quarters – for example, I was discussing Pegasystems yesterday, and in 2008 it showed a 50% increase in new license revenue – it largely sells BPM software. Its 1Q09 results will be an interesting yardstick for these TIBCO results.

TIBCO is proving to be very reliant on its messaging / SOA products, only 21% of revenue coming from its business optimization segment, and that shows how dependent it is on its traditional strength in messaging, but as I said last week this area is coming under threat and has forced TIBCO to adopt an appliance approach to try to defend its position. However in the 1Q09 period TIBCO says it did not make any major appliance sales. Anyway, although I am not familiar with TIBCO’s commercial arrangement with Solace Systems, its partner in the appliance deal, I have to believe that TIBCO will no longer be able to count on all of the revenue stream from the appliance. I can see no alternative but for this segment of TIBCO’s business to fall. it is not surprising that TIBCO is desperately trying to broaden its industry vertical coverage as fast as it can.

Apparently the company is actively looking to make more acquisitions. This could either be to fill in gaps in its overall solution, as its management claims, or could it be to provide non-organic revenue growth to bolster its figures?

I have to confess that personally these results have left me feeling a bit queasy about TIBCO’s future. We should know more when we see some of the other 1Q09 performances in the SOA space, but I did not see anything to make me think TIBCO is surging back…

Steve

These earnings should make interesting reading, and will start to indicate how well the company is standing up to a number of squeezes on its business. TIBCO has been caught recently in a two-way fight with both traditional and new-wave vendors. On the one hand, it sees a key growth market as the general area of SOA, BPM and wider business integration where it is having to cope with the IBM steamroller, while on the other its ‘traditional’ market of core messaging for financial services front-office needs is coming under attack from new market entrants with radical shifts in technology.

IBM goes from strength to strength with its SOA / BPM WebSphere product suite, claiming throusands of deployments, and was always going to be a hard fight for TIBCO. The new TIBCO ActiveMatrix architecture is an attempt to fight back, but it remains to be seen how effective this approach might be. Perhaps more worrying for TIBCO is the surge of new competition in the high-speed financial messaging marketplace, where companies such as 29West and Solace Systems have emerged with messaging offerings that outperform traditional TIBCO Rendezvous messaging. The TIBCO response has been to partner with Solace Systems to produce a messaging appliance that implements Rendezvous software in hardware, since it recently claimed that

Software has reached its limit in ultra-low latency messaging, focusing increasing importance on the hardware “plumbing” to deliver future performance increases.

This brings TIBCO into competition with appliance offerings from Solace Systems, Tervela and IBM (DataPower). However, other vendors have taken a different approach to the performance issue in these highly demanding financial messaging markets, instead revolutionising the messaging architecture to generate the necessary high performance figures through software. Offerings have appeared from companies such as 29West, who pioneered this approach, and latterly IBM (LLM), with even NYSE promising to get in on the act.

So this set of TIBCO results are likely to be even more closely scrutinized than previously. Is the TIBCO strategy working, or is the company getting more and more squeezed? Technologies such as BPM seem to be riding out the recession particularly well, but will TIBCO show similarly resilient figures? Has TIBCO’s admission that Rendezvous software is out of steam carried its customer base across to the idea of appliances, or is it going to open the door to competition? It certainly looks like 2009 will be an interesting year for TIBCO.

Steve

…and stated:

“With Tibco, there is no obvious buyer (as Oracle was with BEA) nor is there a neat fit into one of the majors (as BusinessObjects was with SAP).  Of the 4 listed by the “Analysts” quoted above, only IBM would make any sense.  And Oracle, except that it is busy trying to eat BEA.”

I now wish to recant and disagree with Steve’s view that HP will get the prize.  Now that Oracle has BEA, the next obvious target for it is Tibco and it should move quickly before IBM steps in.  Here are my reasons:

- Tibco has the only big league competition to IBM’s WebSphere-MQ in the message oriented middleware space.  It is used widely in the largest financial services companies, telcos and beyond.  With Tibco combined with Oracle’s database etc and BEA’s application server, Oracle would have the fire-power to take on IBM’s hold in these accounts.

- Tibco has developed its BusinessWorks integration product which plays in the SOA/EDA/BPM space.  This is one of the best development tools I have seen in this space as well as being mature.  Combined with Oracle’s and BEA’s reach, BusinessWorks could deliver in the SOA marketplace in a way that it can’t with a standalone Tibco.

- It would only cost $1.4bn (plus a bit of course). .

And finally what both Oracle and IBM have shown is that in this market there is no such thing as buying a company too soon – if you don’t buy, somebody else will.

Ronan

p.s. I don’t have shares in Tibco.

TIBCO Software has done extremely well since it came into existence from its origin as as Teknekron. Initially an EAI (Enterprise Application Integration) company, it quickly expanded to take on challenges such as Workflow, Business Process Management (BPM) and service-oriented architecture (SOA). More recently it added Business Intelligence and Analysis to its portfolio, strenghtened by the acquisition of Spotfire last year. TIBCO products are well-respected, and it has a strong and loyal customer base.

But with BEA going, and webMethods being taken out by Software AG, it is more or less alone as a pure-play middleware player left. In addition, anyone looking at the results for its 2007 fiscal year (ended Nov 30th 2007) will immediately realize that it is an attractive target. The question isn’t really whether TIBCO will be bought, but by whom.

Names being kicked about include all the usual suspects – IBM, Oracle, SAP….but I reckon that HP might snatch the prize. It missed out on BEA, but perhaps on reflection TIBCO is a closer match to its needs.

Steve

And after the recent news about Business Objects and BEA, such offers may seen inevitable.  Jeff Schenider of MomentumSI for instance argues that we have entered a period of inevitable consolidation.  While I certainly think we are already in an era of big-4 and the rest, that does not necessarily mean that every ‘small’ software company (and remember these are only small in comparison to the giants) must be bought.

The Reuter’s piece covering Ranadive’s statement comments that “Analysts have said suitors for Tibco could include IBM (NYSE: IBM), Hewlett-Packard (NYSE: HP), Sun Microsystems (NSDQ: JAVA), and EMC (NYSE: EMC).”

I personally wonder.  On the one hand you could ask why not?  Tibco has excellent top tier customers who use its long standing messaging products for core business processing.  It also has some of the best SOA products in its BusinessWorks portfolio – combining enterprise grade reliability with good tooling.  However, I think you need to look a little deeper about the two acquisitions which sparked this consolidation talk:

BusinessObjects is in what should to be the hot growth area over the coming years – business intelligence – and thus is perfect for the vendors who want to find a new thing to sell to their customer base or a new way to justify their existing product line (by adding a BI layer on top).  Business Objects should have been a target for IBM and Oracle as well as SAP.

BEA was generally believed to be a long term target for Oracle – BEA had after all used the application server wave to capture business from so many of Oracle’s enterprise customers.  Oracle first took quite a while to take application servers seriously and then took quite a while to become competitive.  Buying BEA finishes the job off quickly and gets back ownership of all those straying BEA customers.

With Tibco, there is no obvious buyer (as Oracle was with BEA) nor is there a neat fit into one of the majors (as BusinessObjects was with SAP).  Of the 4 listed by the “Analysts” quoted above, only IBM would make any sense.  And Oracle, except that it is busy trying to eat BEA.  Therefore, I don’t see Tibco being bought except unless it is Skyped (bought for over the odds to avoid somebody else buying it).

Ronan

Some people seem to think EDA = SOA 2.0. Others that they are already doing EDA in their SOA implementations because they are using asynchronous communications such as a JMS or IBM WebSphereMQ. This confusion is exacerbated by vendors with their own agendas – TIBCO has been banging the EDA drum for ages as the preferred way to go to solve integration problems, IBM has just held a massive event to drive its own SOA agenda, Oracle seem to be trying to straddle the two approaches, and complex event processing (CEP) vendors like Progress have their own stories about EDA.

My own analysis, together with Dr. Ronan Bradley, also of Lustratus, has concluded that as is so often the case, the problem comes down to confusion over terminology. EDA is an architecture, just like SOA. It is a way of running operations, and before anyone starts to ask whether I am on the side of SOA or EDA, the two can happily coexist. But the confusion arises when people start to use EDA as a term to refer to particular implementations rather than to the architecture itself.

In fact, we identified 3 major ways that EDA relates to SOA, and concluded that EDA may have a key role to play as SOA matures – to deal with the increasing management complexity of widescale SOA deployments through a ‘management by exception’ approach.

For those interested in reading the detailed research, Lustratus has published an Insight on the subject, available at the Lustratus site.

Steve

This represents a major investment in upgrading its ability to meet a key requirement that arise in large scale mature SOA deployments: The ability to monitor and control the increasing quantity of business relevant information that flows through the network as SOA becomes more pervasive within an enterprise.

In the pre-SOA world, most business processes are completed within a single application.  Therefore, in order to get a complete picture of the business processes executing it was sufficient to monitor the applications.  In a SOA deployment, this is no longer the case as many business processes are split between applications and much of the information resides in the SOA network and not in applications.  Therefore, to re-establish control from both a business and operations management perspective, it is essential to track the messages and processes flows through the network.

This acquisition gives Tibco a major boost of its Business Activity Monitoring capability (it already had Business Factor which presumably will now be retired) which is at least half the solution: allowing the business and IT operations managers to display and analyse the information.  The other half is identifying the information to deliver and requires what is called Complex Event Processing: the ability to identify the unusual events or combinations of events that are of interest.

CEP is needed because while there is a potentially huge quantity of information flowing around the network (corresponding to each service invocation and response), from a monitoring and control point of view most of this information is of little interest as it relates to the normal routine operation of business processes.  Therefore, the focus is not simply the bulk shipping of all process and message information to a data warehouse but rather the intelligent identification and management of anomalous behaviours (perhaps an order which is so large that it requires special approval or a problem in inventory which is stopping the completion of order processes).

Tibco is also well placed to provide CEP, as it announced last week the second version of its CEP product called BusinessEvents – and I expect to see announcements about how they intend to plug together Spotfire and BusinessEvents.

Ronan