NEW YORK (TheStreet) -- On July 3, I told you that Tibco Software (TIBX) looked like a great buy. This is even though the company, which is in a heated battle with (among others) Oracle (ORCL) and IBM (IBM), was coming off a fiscal second quarter in which revenue dropped 1% year over year. In that article, I said:"I still like Tibco's long-term prospects -- even though many others don't. Management deserves credit for the moves that they've 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." Today, given that shares of Tibco are trading only percentages shy of my $25 target, it's time to re-evaluate the company's prospects, especially since Tibco is due to report third-quarter earnings on Thursday. Truth be told, when factoring in the company's earnings miss in the June quarter, there's no denying that Tibco has not had a tremendous year. But even so, I don't believe there's been a software company that has significantly outperformed to the extent investors would believe that weak enterprise spending has not had an impact on the entire sector. To that end, my 15% upward bet on Tibco following the stock's selloff had much to do with the fact that the Street grossly overreacted. Not to mention, there was some cause for optimism that enterprise spending would begin to pick up, which it has. I won't lie and tell you that the corporate-spending recovery has been as robust as I expected. In that regard, I can't blame those who bailed on the stock. But from my vantage point, I can see that after long periods of underperformance, Tibco, which is in the midst of some pretty significant restructuring initiatives, has proven capable of navigating this soft spending patch. That the Street dismissed Tibco's 3% sequential revenue growth, while overly emphasizing the 1% year-over-year decline, was a perfect example. Granted, the company still underperformed in year-over-year license revenue. But on a relative basis, we can't discount that Tibco's performance was in the same quarter that Oracle posted growth of less-than-1%, missing Oracle's own guidance. Plus, investors ignored that not only did Tibco grow license revenue 5% sequentially, to $82 million, but the company continues to do well in maintenance revenue, which advanced at a better-than-expected rate of 6% year over year and 3% sequentially.
The bears, meanwhile, remained unimpressed. Look, I'm not suggesting that this was an extraordinary quarter by any stretch. I'm not going to pretend that the prolonged weakness in Europe and government spending suddenly no longer matter. Still, we have to agree that on the basis of non-GAAP EPS of 18 cents, which met Street estimates, management's efforts to reorganize infrastructure sales are moving along better than expected. Tibco's challenge -- above all else -- is to grow revenue at a rate that convinces the Street that the company is gaining some real operational leverage. In other words, while there are clear business improvements, there is still plenty of work left for the company to do to justify more gains in the share price. I believe this work starts on Thursday, when third-quarter earnings are released. The Street will be looking for EPS of 22 cents on revenue of $258.2 million, which represents revenue growth of just 1.3%. Essentially, there's not a whole lot that's expected in terms of top-line growth. I believe this is a situation where the Street has essentially embraced Tibco's new direction, while appreciating the company's efforts at reorganization. To go along with the company's existing strengths in messaging and integration, over the past couple of quarters, management has been working to grow Tibco's capabilities in areas like real-time business intelligence, visualization and complex event processing. These are technologies that are specifically targeted to capitalize on the growth of big data. These area -- including message-oriented middleware, where Tibco currently ranks second to IBM in market share -- makes Tibco a direct rival of giants like IBM and Oracle. What's more, management recently discussed shoring up the company's strengths in data analytics, which is not only Oracle's specialty, but it's also a market in which SAP has shown strong interest. While Tibco isn't expected to immediately threaten Oracle, IBM or SAP, the company's ambitions and its high level of execution makes it one to watch. While growth has not been exceptional, Tibco deserves some time to get its house in order. It's a good thing that management has done such an excellent job of communicating the company's course. The Street, meanwhile, even by virtue of its dismissive reaction to the company's progress, appears to now be on the same page. While this can certainly be a good thing for the company, it also means that unless Tibco blows the Street away with earnings and raises guidance, this stock just might have reached its ceiling. At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.