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Tibco: Strong 3Q Validates Enterprise 3.0 Mantra

Tibco CEO Vivek Ranadive for years told anyone who would listen that the big enterprise players like Oracle and SAP just don't get it.

If Thursday's third-quarter earnings report is any indication, he might have an even larger audience for his views in the months and years to come.

The middleware provider delivered an upside surprise in its third quarter, posting a profit of $22.1 million, or $0.13 a share, on sales of $150.3 million -- easily topping analysts' consensus estimates of $0.11 a share and sales of $144.5 million, respectively.

During a conference call with analysts, Ranadive attributed the strong sales and earnings to "the acceleration away from the Enterprise 2.0 architecture" to cloud-based applications that are event-driven.

"We believe in the cloud for both data memory and the database," he said. "The other day Larry Ellison called it water vapor. There's a real a shift to what I keep calling Enterprise 3.0. We talk about events and the cloud and people are very responsive to that. It's not even a trend anymore. It's just a fact."

Last week, the much bigger Oracle, which sells its competing Fusion middleware suite, managed to meet analyst estimates in its most recent quarter but reported disappointing revenue growth and a double-digit decline in licensing fees.

Despite what Ranadive called a "tight" enterprise spending environment, Tibco managed to record 17 $1 million-plus deals in the quarter (up from 14 in the year-ago period) and posted a 35 percent improvement in SOA sales.

"What you're seeing is that this environment is helping us," he said. "Customers are more interested in value than brand."

In the third quarter of last year, Tibco earned $11.1 million, or $0.08 a share, on sales of $162.3 million.

Its shares closed off $0.07 a share to $9.13 in Thursday's trading but stormed up $0.67, or 7 percent, to $9.80 following the earnings announcement.

A takeover target?

Long considered a likely takeover target for either SAP or Oracle, the company gave a strong indication that it plans to remain independent for quite some time with its $28 million acquisition of grid and cloud-computing software maker DataSynapse in late August.

The stock spiked shortly after the latest SAP rumor surfaced in early August but, according to Jefferies analyst Katherine Egbert, it's far more likely that Tibco will forge a partnership with one of the enterprise software leaders rather be swallowed up by one.

"We don't see Tibco as a target at the current time," she wrote in a research note.

Ranadive, who has repeated stated that the company was not for sale, told analysts that customers are starting to understand Tibco's view that every event representing a customer interaction, the movement of a product or a change in process represents an opportunity to improve sales, detect trends and manage risk.

"Our results only amplify our leadership in an enterprise software market that is largely homogenous, bland and unresponsive to business needs," he said.