Key questions and answers from the second quarter fiscal 2008 earnings conference call conducted by TIBCO Software Inc. (TIBX: chart) on June 26, 2008.
John DiFucci (JP Morgan):
Obviously it was a tough quarter but at the same time there was some strength, especially in the cash flow number, although you had a lot of comments that sounded pretty conservative. Could you give us a little more color around the conservatism that you actually put into the guidance?
Murray Rode: For starters, we did effectively lower annual guidance on a couple of dimensions, both total revenue and license, so that’s where some of the conservatism comes in. I think we have said all along, as we’ve entered the year, that we really didn’t feel that the guidance we were giving was that aggressive since it originally only assumed about 6%-9% growth in the core business and then had a full year of Spotfire in the numbers versus a half year. So we’ve backed off a notch from that with this guidance.
At the same time, we still remain pretty positive on the opportunity and I think the conservatism is really more a nod to take into account of a little bit more volatility perhaps, because of the macro environment. So a little bit more conservative on revenue and then because we do feel we are more conservative on our expenses we can still maintain the EPS guidance we have.
John DiFucci (JP Morgan):
You’re still planning to hire more and keep your goals for sales people. What are the areas where you think maybe you’ll cut back a little bit?
Murray Rode: The sales organization is a pretty big organization and has a variety of different roles, not just quota-heads. So there are roles that we have already been streamlining to make room for more quota-heads and simplifying our sales organization. And that’s something we’ve done through the first half of the year. Secondly, we are making more room in the marketing budget and we’re being very careful as well with our G&A expense.
Tim Klasell (Thomas Weisel):
Just a quick question around your services line, it was a little bit stronger than anticipated and margins also improved. Was that being driven by Spotfire or was there some extra maintenance or something on the core TIBCO side?
Murray Rode: It was really more driven by strong maintenance, the margin part was driven more by strong maintenance growth. Services did grow as well, and we did hit the margin targets we had for the quarter but the margin benefit was coming mostly from maintenance growth.
Tim Klasell (Thomas Weisel):
Your guidance would indicate a real strong finish to the year, but what gives you the confidence in the pipeline that you can close than in the fourth quarter? Any metrics you can share with us?
Murray Rode: I think quantitatively, particularly coming of the second quarter, we are careful with the total level of coverage in the pipeline, and looking at the big deals that we have and how they might play out and scrubbing the forecast for some of those deals that seem more speculative. S so generally, at this point, we feel good about the pipeline in terms of the coverage that we have for guidance.
Tim Klasell (Thomas Weisel):
And then with the Insightful acquisition, can you use the same channel with Spotfire you’re using right now or can you walk us through how that fits into your go-to-market strategy?
Murray Rode: We’ll talk about that in a lot more detail once the transaction actually closes, which I would expect we will do coming off our third quarter. But generally, we will leverage the Spotfire channel. So that’s where it fits most tightly.
Derek Bingham (Goldman Sachs):
First, on some of the deal slippage that you mentioned, do you have any more color you can give in terms of how large some of these deals might have been and if you have made progress to close them already?
Murray Rode: We have made progress. We basically saw about $10.0 million in value of deals slip in the last week, and a big part of that slip even very late in the last week. So far we have closed close to $4.0 million of that. There’s another $4.0 million that we currently deem as likely, in terms of the forecast, and then another $2.0 million, which is potentially more speculative for the quarter.
Derek Bingham (Goldman Sachs):
And just trying to do the math on the approximate segment breakdowns, they look like all the segments seem to have done quite well, with the exception of SOA. Is there anything unique that you see going on there that you’re concerned about?
Vivek Ranadivé: We’re seeing very strong demand for our product of Business Optimization. We are starting to see a resurgence of demand for just the messaging products, our new SOA Active Matrix family is catching on. And what we’re seeing really is something I briefly mentioned on this call, but we’ll talk more to on future calls, which is this move away from a storage database architecture to more of a memory architecture. And it’s just brought on by the increase and scope in velocity that everyone’s experiencing.
And companies like Amazon, eBay, and so on, Google, are well known for using these memory architectures and we’re starting to see that that actually more and more of the mainstream corporate world is moving in that direction. So, we are seeing strength pretty much across the board.
Kash Rangan (Merrill Lynch):
I was just wondering if you noticed any disruption potentially due to the BEA acquisition being closed by Oracle in the middle of your May quarter and also your forward-looking views on how that acquisition potentially impacts or does not impact your business?
Vivek Ranadivé: We haven’t seen any disruption from that, Kash. Deals that slipped had absolutely nothing to do with that. We are seeing a lot of BEA sales people on the marketplace, which is good for us. And we’re also starting to see a little bit of a backlash where customers of ours are now asking if what we have can actually help them move away from apps overs because apparently their maintenance fees are being upped. So we have seen no disruption. If anything, people are more closely examining ways to get off their dependence on Oracle.
