Tibco's Q2 outlook bombs: More execution issues or excuses?
Another day, another enterprise software vendor with sales execution issues. Perhaps cloud computing, SaaS and a CIO penchant for operating expenses over perpetual licenses are the real causes of earnings woe.
Enterprise software vendors sure are having a lot of sales execution issues these days. A day after Oracle's quarter missed estimates on many fronts, Tibco Software delivered a disappointing outlook. And like Oracle, Tibco blamed execution issues.
It may be time to call a few bluffs.
Tibco reported fiscal first quarter earnings of $9.5 million, or 6 cents a share, on revenue of $237.8 million. Non-GAAP earnings for the quarter were 18 cents a share. Wall Street was looking for first quarter earnings of 18 cents a share on revenue of $242.45 million.
Simply put, Tibco's quarter was a mixed bag. Vertical revenue was solid with the exception of financial services. Tibco executives also said that a few large deals slipped. Tibco's software covers a lot of ground. The company has cloud, big data, service oriented architecture, messaging and even a business process management social network called tibbr.
The company projected second quarter non-GAAP earnings of 17 cents a share to 19 cents a share with revenue between $242 million and $252 million. Wall Street was looking for earnings of 25 cents a share on revenue of $264.08 million.
Tibco CEO Vivek Ranadivé said that the company had sales execution issues---just like Oracle did. He said:
While demand for our products and solutions remained strong, execution issues continued to hinder our results. While it is possible that macro pressures had an impact in select corners of our business, that does not explain this quarter's performance. Our issues are primarily execution-related, and there remains work in process on some of the positive changes we instituted beginning last quarter.
We still closed a number of large and strategic transactions this quarter. Our midsize deal mix is performing well. Our cloud business is building at healthy rates. But for the exaggerated effect of a handful of deals, our performance this quarter would have looked markedly better. And I can truly say from my many conversations with customers and prospects, our value proposition and differentiation have never been greater. The market appetite is there and growing.
Analysts weren't buying it though. They are increasingly questioning the demand picture.
Tibco's operating chief Murray Rode said that deals in the Americas and Europe slipped into the second quarter. The Asia Pacific region held up.
Overall, it's a bit odd that two enterprise software vendors in two days cite sales execution issues, refrain from blaming the economy and indicate that their pipelines and demand are just swell.
Something here doesn't add up. Here's an educated guess. The enterprise software licensing and maintenance model is under strain from cloud computing and software as a service. The likes of Tibco and Oracle have healthy businesses, but winning new customers is increasingly difficult.
Piper Jaffray analyst Mark Murphy summed up the prevailing view:
The company experienced a muted environment for net new deals and highlighted increasing competition from the likes of Oracle and IBM. The company continues to experience sales execution issues in North America, and cited difficulties in Europe, particularly the UK. As with many of its on-premise software peers, we believe Tibco is grappling with the rapidly changing dynamic of computing environments moving to the cloud. We believe this change also produces the negative effect of shifting CIO mindsets to view operating expenditures (SaaS subscriptions) more favorably versus capital expenditures (perpetual licenses).