TIBCO has hit the skids as its 26 per cent revenue trading exposure to weakening financial services markets led to a squeeze on deal closures in the latest quarter. Details of TIBCOs miss suggest that revenue is expected to come up short in the range of $3-9 million with license revenue hit $8-9 million.
In a prepared statement, CEO Vivek Ranadive warned:
"Although business was notably weak in financial services and government, the late change in business occurred in a variety of geographies and verticals and appears most related to unanticipated delays in deal-specific approval processes. Competitive losses were not a factor, so we do expect some of the business that fell out of the quarter to return in subsequent quarters."
Some commentators see TIBCO as the canary in the coalmine for tech spending health in the financial services market, which in recent times has been hit by the credit crunch. According to a research note from analysts Jeffries and Co:
TIBCO's results are a first glimpse to a potentially larger slowdown in financial services spending. Other companies with particular exposure to the financial services vertical include BEA Systems (BEAS - $12.51, Buy) with approx. 17% of license revenue, VASCO (VDSI - $34.73, Hold) with 85% revenue, and Red Hat (RHT - $19.56, Buy) with an estimated 20% revenue exposure.
TIBCOs position is particularly worrying for several reasons. It has been traditionally strong in the financial services market but it's exposure is unusually high for any general software application provider. In recent times, there has been regular criticism of SOA style projects from fellow Irregular Vinnie Mirchandani.
Another problem is that TIBCO has viewed SOA as a TLA on which to hang its bread and butter offering. Customers are increasingly frustrated with SOA as an ill-defined, nebulous term that describes a philosophy rather than a clearly defined product. Multi-year SOA projects are proving increasingly difficult to justify as vendors find it harder to provide solid ROI stories. Net-net, and despite valiant efforts to the contrary like its Greg the SOA Architect campaign, TIBCO is caught in a marketing bind from which it needs to extricate itself.
In response to these factors, TIBCO has changed tack, relying less on very large deals, concentrating instead on opportunities where the cost justification is much easier to demonstrate. This has meant lower overall deal values. Clearly however, these moves have not done enough to strengthen its position.
Progress Software, which with its Apama engine has been doing well in derivative markets is not feeling the pinch. Sources say that its broader base of customers and growing list of quality reference sites mean that its exposure to the financial markets is less pronounced. A source at Progress said: "We're not seeing any pushback." We'll see how true that is when Progress next reports.
Despite this gloomy assessment, TIBCO continues to look for expansion opportunities and is opening up markets in China and Russia. At the same time, it continues to earn plaudits for its Ajax toolkit, General Interface, but is understood to be earning little by way of revenue from this source.