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THE WALL STREET TRANSCRIPT
Questioning Market Leaders For Long Term Investors
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PAUL HANSEN - TIBCO SOFTWARE INC (TIBX)
CEO Interview - published 11/04/1999
CEO INTERVIEW: VIVEK RANADIVE, TIBCO SOFTWARE INC (TIBX)
THE WALL STREET TRANSCRIPT CORPORATION (HAU216)
VIVEK RANADIVE is the Founder, Chairman and CEO of TIBCO, a global
leader in enterprise software and integration technologies and services.
The technology vision on which he founded the company in 1985 has been
realized far beyond the financial services industry, where the company
built the first digital trading system. McGraw-Hill recently published
Mr. Vivek's book title: 'The Power of Now: How Winning Companies Sense
and Respond to Change Using Real-time Technology.' His book offers an
exciting look at how companies can harness real-time technology to
compete in the Internet age. In the words of Sun Microsystems CEO, Scott
McNealy, Mr. Vivek's book is 'about business, about speed, about
competition, about technology, and about success in an increasingly
global networked society.' Prior to founding TIBCO, Mr. Vivek was
President and founder of a UNIX consulting company. Previously, he held
management and engineering positions with Ford Motor Company, M/A-Com
Linkabit and Fortune Systems. Mr. Vivek is a frequent presenter at
banking, software and business conferences on business issues, including
real-time infrastructure software and other software technologies; how
to leverage the Internet; and the future of banking, information
management, and trading of financial instruments, oil, gas, electricity
and water. He earned an MBA from Harvard Business School, where he was a
Baker Scholar. Mr. Vivek received a Master's Degree in Electrical
Engineering and a Bachelor's Degree in Mechanical Engineering from the
Massachusetts Institute of Technology (MIT). PAUL HANSEN is Executive
Vice President of Finance and Chief Financial Officer at TIBCO. Mr.
Hansen is responsible from TIBCO's information services, human resources
and facilities, and accounting and finance, including mergers and
acquisitions and investor relations. His staff includes the VP of
Finance, VP of human resources, controller, sales controller, and
director of information services. He spent 14 years with Adaptec prior
to joining TIBCO in July, 1998. As the Corporate Vice President of
Finance and Chief Financial Officer he was instrumental in the growth
and sustained profitability of Adaptec. Mr. Hansen joined Adaptec in
1984, when the company had annual revenues of $7 million. In fiscal year
1998, Adaptec reported revenues of more than $1 billion and has had 55
consecutive quarters of profitability. He holds a BS in Business from
the University of New York.
SECTOR: application software
TWST: Could we start out with a brief overview of TIBCO Software?
Mr. Ranadive: Yes. TIBCO Software is a company originated with a company
I originally founded about 15 years ago, and the original company
provided software for Wall Street, and this was a company that I sold to
Reuters about four years ago. TIBCO Software was spun off from Reuters
about two-and-a-half years ago from this company and the mission of
TIBCO Software was to take the $300 million worth of technology that we
had developed over the years and to leverage it for e-business and as
real-time Internet infrastructure. The company is two-and-a-half years
old; its purpose is to provide real-time, end-to-end infrastructure for
e-business and for business-to-business commerce. TIBCO Software went
public in July of this year and has major corporate investors including
Cisco, Reuters, Sun and Yahoo!
TWST: Providing back end software for e-commerce is a big charge, are
you focusing on a particular segment of that market?
Mr. Ranadive: We're focusing on the end-to-end integration, so really
the plumbing: you can think of it as the Cisco of software. Just as
Cisco ties networks together, we tie information and applications
together on the intranet, extranet and Internet.
TWST: Who are some of your customers?
Mr. Ranadive: Our customers are 400 of the world's largest financial
institutions, 60% of the world's semiconductor manufacturing companies,
most of the large energy companies, many of the large telecommunications
service providers, and the major portals, like Yahoo!, Netscape,
AltaVista, Lycos, CBS SportsLine. So it's really companies across four
or five different vertical markets: finance, high tech manufacturing,
energy, telecommunications, portals.
TWST: What is the potential size of this market?
Mr. Ranadive: IDC says that the market is going to grow from less than a
$1 billion to over $15 billion in the next three years.
TWST: That's a rather substantial growth rate.
Mr. Ranadive: Allegedly, the fastest-growing segment of the software
industry today.
TWST: And whom are you competing with in this space?
Mr. Ranadive: The market is fragmented. At one end of the market there's
IBM, and they have a set of infrastructure products. At the other end
there are small companies like Active Software and Vitria, and what
makes us unique is we provide the whole range of capabilities needed for
e-business infrastructure. There's probably eight or 10 different things
you need to do in order to provide e-business infrastructure. There is a
variety of players Active does one piece, Vitria does another piece and
Backweb does another piece. TIBCO provides the whole 'stack', the total
software infrastructure solution for e-business.
TWST: Is that one of your big competitive advantages?
Mr. Ranadive: People want to reduce the number of moving parts and we
provide one part versus having to glue eight parts together.
TWST: As we look out of this rapid growth business over the next couple
of years, are there going to be any big changes or developments other
than just the sheer speed of e-commerce developing that investors should
be aware of?
Mr. Ranadive: I believe that there's going to be a consolidation and
that just as in the networking market six, seven years ago there was
Cisco and there were many other players, and then one company emerged as
the leader. Because people want a one stop solution. And so, similarly,
you are going to see that kind of convergence in this market as well.
TWST: Even at this early stage?
Mr. Ranadive: I think it will happen sooner than it did in the
networking market. I think for a couple of years all the boats will
rise, but very quickly one boat will be bigger than all the other boats.
TWST: What is going to cause that rapid consolidation?
Mr. Ranadive: The market demand for everything has moved up and
everybody wants to have this economy, of what one of our customers
refers to as 'calls, clicks and come in'. You want to be able to come
into a store and spend 30 minutes, or you want to be able to call on the
phone and you will spend no more than 30 seconds. Or you want to be able
to come over the Web and, quite likely, you'll spend no more than two
seconds.
TWST: So it's all Internet speed?
Mr. Ranadive: It's all Internet speed, and so people don't have the
luxury of waiting for a long time to be able to do all this. And they
don't want to have to go to eight different people to try and glue it
all together when they can get it from one company.
TWST: Now are you properly positioned today to take full advantage of
what's going on out there?
Mr. Ranadive: We are always very paranoid. We feel that we're better
positioned than anybody else. IDC has named us the market leader in this
space, and we feel that we have the strongest position, we have a clear
message, and we need to continue to execute well.
TWST: Do you have the structure you need in place to get you through the
next couple of years?
Mr. Ranadive: When you say structure, if you refer to the management
team, yes, it is a very strong management team. When you say structure,
if you mean partnerships. Yes, we've got some fantastic partners, we
need to add more, but we're well on our way to doing that. If when you
say structure you mean capital structure. Yes, I think we have a dream
team of owners; we have the biggest and best ownership structure
imaginable for a company in this space. We've got Cisco, the largest
networking company; Reuters, the largest content provider; Sun, the
largest provider of servers for the infrastructure business; and Yahoo!
the most prestigious and largest portal in that space. So, I think in
terms of, yes, if that's what you refer to as structure, then yes. We
need to do more. We made an acquisition a couple of weeks ago and we
continue to do that kind of thing to expand our presence.
TWST: What kinds of acquisitions are looking for?
Mr. Ranadive: We're looking to be number one in key vertical markets,
and we are looking at growing the verticals we participate in. So we're
looking for companies that have a strong customer presence in key
vertical areas. So the acquisition that we did, a company called
InConcert, has a strong presence in the telco sector and that's why we
bought them.
TWST: Is there some particular area that you are addressing that seems
to offer you the biggest opportunity over the next couple of years? Or
is it hard to identify at this point?
Mr. Ranadive: I think, you know, every few months there's a lot of hype
about a different thing, but what we do is very simple. We solve one
class of problem, which is: How do you provide the end-to-end
infrastructure for e-business? And whether it's business-to-business,
business-to-consumer, business-to-employee, and whether it's for telco's
or for high tech manufacturing companies, it's a simple problem to
describe, but it's hard to solve and we solve it in a complete fashion.
TWST: If investors are trying to keep an eye on TIBCO, what should they
look for as benchmarks or milestones to judge your success? Is it
partnerships?
Mr. Ranadive: No, I think they should look at three things. One, they
should look at revenue growth, and they should look at steady growth
year in, year out. And I believe that's important. Two, they should look
at breadth of the offering. See, the challenge that investors have is
there's like 15 companies, who's going to be the next Cisco? And what
characterized Cisco was predictable and sustained revenue growth. That
was number one. Number two, one stop shop, and Cisco provided a one stop
shop. So they should look for breadth of product line. And number
three, they should look for domination by vertical market.
Mr. Hansen: You know, we just finished our 11th quarter and we're on a
better than $100 million run rate right now, so that speaks pretty well
for how well we are being received by those potential customers out
there. And that's obviously a leading factor. We talked a little bit
about how well we were organized. We're pretty geographically dispersed.
We have organizations in Europe, Australia and Asia. In Europe we have
60-65 people today and we're getting more than 40% of our revenue
outside the U.S. So we think we're very well placed to take advantage of
the opportunity.
Mr. Ranadive: I guess, one question I have for you and for Deutsche
Bank, which is, we did $24 million in revenues in our 11th quarter. Has
there ever been a software company that did that or more than that in
their 11th quarter?
TWST: Not that I can think of right off-hand. There may be, but I think
it's going to be hard to come up with.
Mr. Ranadive: I don't think even Microsoft did that, so we think we're
on to a good thing here.
TWST: When investors look at the company, what should they worry about?
What keeps you up at night?
Mr. Ranadive: What keeps me up at night is how we continue to attract
good people. And that's obviously a worry that every high tech CEO has.
And we need to continue to make sure that we grow at a rate that that
allows us to maintain our high standards in terms of the quality of
people we hire.
TWST: How are you doing in attracting people in this difficult
environment?
Mr. Ranadive: We have, so far, very well. We'd like to do better, but so
far, as well as one can expect in this environment. TIBCO Software is
viewed as a hot stock and a hot company and we're in a hot space and, at
the same time, we're able to attract people we are not looking for
people that are short-timers: we're looking for people that have a long-
term view of things, and I think we're attracting those kinds of people.
TWST: What kind of programs have you put in place to attract them?
Mr. Ranadive: We have a three part philosophy in attracting people. One,
you know, we obviously want to pay them well, but we don't want to bribe
people to come here. We want them to come here because they want to be
here. Two, we like giving people bonuses potentially very significant
bonuses based on performance. And three, we give them equity in the
company. Now, having done and said all of that, we also create a
community of the best and brightest, which attracts more of the best and
brightest. And so, in our target markets, we find that we have the best
expertise on the planet.
Mr. Hansen: I think the kind of work that we do really excites people
and that's one of the ways you attract more people. I'm sure you've
observed before that leading companies attract winners. We're focused on
continuing to attract winners over the long-term.
TWST: When you're in a hot market like e-commerce, that's where people
want to be.
Mr. Hansen: Absolutely.
TWST: How do you feel about the value the market is currently putting on
your company?
Mr. Ranadive: The analysts that cover us give TIBCO their highest
rating. Yet, when you compare our market cap with competitors like
Vitria who is only one-fifth our revenue but has a market cap
approaching ours , there is a serious market discrepancy and TIBCO is
clearly undervalued.
TWST: What is the market missing?
Mr. Ranadive: I think the market is missing that TIBCO has the potential
to do in software what Cisco did in hardware.
TWST: And is that because?
Mr. Ranadive: I think it's because focus on our customers rather than
hyping our company. In fact, if you look at any of the really highly
valued companies in the infrastructure space, we trade at a significant
discount to them.
Mr. Hansen: We're focused on long-term growth for our investors and
sometimes you have to be patient with the response from the market.
Mr. Ranadive: Yes, because other companies like Inktomi, Ariba, Portal
and BroadVision, that have fairly significant market valuations, and we
don't compete with these companies, but we're in a similar space. So I
would say that relative to our peer group, we're pretty seriously under
valued at this point.
TWST: So you have to quit hiding your light under a bushel basket, as it
were?
Mr. Ranadive: I'm confident that by staying focused on delivering
quarter after quarter results, you'll see the appropriate recognition
from the market.
TWST: If you were sitting down with some potential investors, what two
or three reasons would you give them to go out and buy your stock at
today's prices?
Mr. Ranadive: First, we're the number one player in the number one
segment of the number one sector of the software industry. In other
words, we're leading the segment that has the fastest growth rate.
Second, every quarter we're putting more distance between ourselves and
the competition. Third, my previous comments about value should be
encouraging for any investor.
TWST: Sounds like a good reason to me.
Mr. Hansen: TIBCO's success today in e-business solutions has been
accelerated by the reliability and scalability of our underlying
technology. This will continue to be extremely important as the e-
business and business-to-business markets develop. We feel we are well
positioned in this marketplace.
TWST: Is there anything we should have touched on and missed?
Mr. Ranadive: No, I think you had a pretty comprehensive list of
questions.
TWST: Thank you.
VIVEK RANADIVE
Chairman and CEO
PAUL HANSEN
Chief Financial Officer
TIBCO Software, Inc.
3165 Porter Drive
Palo Alto, CA 94304
(650) 846-5000
(650) 846-5005 - FAX
Each Executive who is the featured subject of a TWST Interview is
offered the opportunity to include an Investors Brief or other highlight
material to be provided and sponsored by and for the company. This
Interview with Vivek Ranadive, Chairman and CEO and Paul Hansen, CFO, of
TIBCO Software, Inc., is accompanied by an Investors Brief containing
corporate information.
Copyright 1999 The Wall Street Transcript Corporation
All Rights Reserved
The Wall Street Transcript (TWST) interviews are published verbatim, and
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