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Tibco Software Looks Like a Great Buy

Management seems up to the challenge. Although gross margin shed roughly 2% year over year, Tibco was able to meet expectations. Profits weren't exceptional, though, with net income falling to $8.7 million from $26.5 million in 2012. But the company met non-GAAP earnings-per-share estimates at 18 cents.

It was far from an exceptional quarter for Tibco. But management didn't try to pretend as if it was more than it was. The company's CEO, Vivek Ranadive, acknowledged what the Street has known for some time -- there is still plenty of work left for the company to do. Although restructuring plans are on target, it doesn't mean Tibco is completely out of the line of fire.

The good news is the company has excellent products that customers love. The bad news is that, well, the company has excellent products that customers love. What I mean by this is, Tibco has caught the attention of many of its rival, including Oracle, which has shown some recent signs of struggles.

What's to stop Oracle, which has plenty of leverage, to launch an all-out attack against Tibco as Oracle seeks to increase revenue? Oracle, or for that matter Salesforce.com (CRM), can add margin pressure to Tibco at the expense of their own margins. The scary part is, they would still be able to post decent results.

In other words, there is the risk that Tibco's profits can suffer amid its restructuring efforts. This makes falling in love with the stock a risky proposition.

That said, I still like Tibco's long-term prospects, even though many others don't. Management deserves credit for the moves it has made, many of which should create more value for shareholders over time. Accordingly, with long-term revenue growth that should outperform both IBM and Oracle, I value shares of Tibco at $25, or 15% above current value.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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