Tibco Software has more 12-month revenue than both Splunk and Tableau Software combined. Yet both Splunk and Tableau have market capitalizations that are far higher than Tibco's, reflecting a premium that Wall Street has placed on growth. Tibco Software's stock also continues to trade near a multiyear low, while its peers thrive, suggesting it has something to learn from Splunk and Tableau.
Big data, big hopes
Tibco, Tableau, and Splunk all operate within the realm of big data, an industry that IDC estimates will be worth $16.1 billion this year. This business is widespread across all industries, analyzing data and then helping customers to use the information to make better decisions.
Big data can be used to assess the data usage of telecom customers, thus giving companies a breakdown by geography, network, age, etc., ofwhich customers use the most data. Big data can be used in medicine to predict which chemical compounds might cure certain diseases. Or it can tell grocery stores which items are most popular among certain age groups, or most sought by thieves. Essentially, the possibilities are endless.
Tibco, Tableau, and Splunk are all similar companies, but they have certain distinguishing differences. Tibco uses fast data, based on real-time information, which is popular with enterprise customers. Tableau uses slow data, information collected over a period of months. Splunk offers machine data, which is collected in data centers, such as information based on network devices, security devices, websites, mobile devices, cash registers, and ATMs.
A disconnect in performance
Given each company's niche, and the ever-growing presence of big data, investors might think all three companies are on a level playing field. However, while Tableau and Splunk saw year over year revenue growth of 81.8% and 51.8%, respectively, during their last quarters, Tibco revenue grew just 3.3%.
Tibco also experienced a 7% decline in licensing revenue, which accounts for 30% of total revenue.Meanwhile, Splunk saw license revenue growth of 44%, while Tableau's grew 80%. With license revenue being a good indication of future service revenue, investors can assume that Tibco's problem lies in weak license performance. And w hile poor licensing revenue might be Tibco's outcome, the reason for its underperformance is rather simple.
A simple problem that requires action
In an interview with The Motley Fool, Tibco Software CEO Vivek Ranadive said his company's software is superior because of its real-time function, and that customers say "it is just as, if not easier, to use." However, Ranadive acknowledged that " what's not easier is to pay for it," in regards to software from Tibco versus Tableau.
Specifically, Ranadive noted that Tableau allows users to purchase softwarewith a credit card, and that Tableau's service is very cheap to consume. Tableau has placed an emphasis on simplicity with its applications, while also focusing on low cost, using this approach to steal market share from Tibco .
Apparently, Splunk took notice of Tableau's approach; after a 40% stock value loss during the first five months of 2014, the company cut pricing of its popular Splunk Cloud analytics platform by 33% during its last quarter. The result was accelerated growth, along with a stock that has surged nearly 30% since its most recent quarterly results.
Big data may be fast-growing, but it is also a service that both enterprise and small businesses don't want to pay excessively to own. Ranadive understands that Tibco must lower prices and make it easier to purchase software.
"We have customers that have millions of dollars invested into data, becoming the backbone of what they are doing," the CEO said. "So, we have to make sure that all pieces fit together so when we offer a low-end product to purchase off your credit card, we're not creating unhappy customers on the high-end of the process."
Foolish thoughts
Ranadive made this statement in May, and while Tibco's growth has worsened since then, Tableau and Splunk have never appeared stronger. In other words, if Tableau's pricing and accessibility strategy does not make clear that it's time for Tibco to lower prices, then Splunk's success following its cut most certainly serves as proof. Ranadive and other Tibco executives should take this knowledge in stride, quit procrastinating, and make the necessary changes to reduce prices. If they don't, the company's performance could get far worse before getting better.
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The article What Tibco Software, Inc. Can Learn From Splunk and Tableau Software originally appeared on Fool.com.
Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Splunk and Tibco Software. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
