BOSTON (TheStreet) -- The rivalry between Oracle (ORCL) - Get Report and SAP (SAP) - Get Report for business-software domination has overshadowed smaller companies that are taking giant steps.

One is Palo Alto, Calif.-based

Tibco Software

(TIBX)

, which was founded a quarter century ago. Shares of Tibco, which provides infrastructure-software services, jumped 11% Friday, following the release of its fiscal second-quarter results.

Tibco's predecessor, Teknekron Software, which was acquired by

Thomson Reuters

(TRI) - Get Report

, helped revolutionize Wall Street in the '90s. "The Information Bus," or "TIB" technology, created by the company integrated market data on the trading floors of banks and financial firms. (The name "Tibco" stems from that product.) Today, capital markets remain a critical element of Tibco's business. Its messaging systems are still prevalent on Wall Street trading floors.

But growth is coming from a variety of industries, including telecom, energy, government, life sciences and insurance. Tibco does business with educator

Corinthian Colleges

(COCO)

, data processor

Total Systems Services

(COCO)

and European telecom giant

Vodafone

(VOD) - Get Report

, among others. Tibco booked 85 deals over $100,000 during the second quarter and 12 transactions of more than $1 million, indicating that tech spending is ramping up.

Technology researcher

Gartner

(IT) - Get Report

predicts that enterprise IT spending will increase 4.1% this year, a trend that will benefit Tibco. Enterprise tech spending dropped 5.6% during 2008 as the recession dawned. Technology is stock analysts' second-favorite sector, following health care, based on median ratings, and Tibco is now considered a top growth play.

Fiscal second-quarter profit, published Thursday, increased 27% to $13 million, or 8 cents a share, as revenue grew 21%. Tibco's operating margin widened from 9.8% to 13%.

Tibco shares popped 11% on the quarterly report and have returned 85% during the past 12 months, outperforming the

S&P 500 Index

by nearly 70 percentage points. Despite the solid run, valuation remains attractive. Tibco sells for a price-to-projected-earnings ratio of 15 and a price-to-book ratio of 2.4, 42% and 44% discounts to software peers. Its PEG ratio, a measure of value relative to growth, of 0.3 signals a 70% discount to estimated fair value.

Analysts are moderately bullish on the stock, with five, or 42%, rating it "buy," six rating it "hold" and one ranking it "sell."

TheStreet Recommends

JPMorgan

(JPM) - Get Report

and

Gleacher & Co.

(GLCH)

offer a target of $15, leaving a potential return of 23%.

Deutsche Bank

(DB) - Get Report

and

Goldman Sachs

(GS) - Get Report

forecast that the stock will rise another 11% to $14. Tibco's stock has achieved annualized gains of 9% since 2007, so another year of outperformance isn't improbable.

Acquisitions are a key component of Tibco's stategy, as they are for those of Oracle and SAP. Tibco purchased DataSynapse, Foresight and Netrics during the past year. Its $1.15 a share buyout of

Proginet

is expected to close this fall. Considering Tibco's meager $2.1 billion market value, it's unusual that so many high-profile banks cover its stock. The reason is twofold: (1) they foresee major upside and (2) they are familiar with its business model.

Its earnings per share for the first half of fiscal 2010 is 14 cents, which represents an increase of 56% over a year earlier and a jump of 180% over two years earlier. However, in one metric, Tibco lags its peers. Return on equity, a key measure of profitability for investors, rose from 7.6% to 9.1% in the latest period, whereas the industry average climbed to 23% and the S&P 500 average jumped to 10%. Tibco's return on equity consistently trails that of its rivals.

Profit spreads are another weakness. Tibco's gross margin of 77% is respectable, but its operating margin of 13% and net margin of 7.3% trail those of software giants

Microsoft

(MSFT) - Get Report

, which has a net margin of 28%, and

Oracle

(ORCL) - Get Report

, at 19%. What Tibco lacks in pricing power, it makes up for in growth prospects. Since 2007, it has increased earnings per share 14% annually, on average. There is more upside in this small-cap tech stock.

-- Reported by Jake Lynch in Boston.

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