TIBCO Software Inc.
TIBCO Software Inc.
Sales: $445.9 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: TIBX
NAIC: 511210 Software Publishers
TIBCO Software Inc. develops software that enables the various applications, databases, and platforms used by companies to work together. The company's products are known as integration software, the "middleware" that bridges the computer systems within a business and connects the business's software to outside suppliers, vendors, and customers. Integration software is regarded as a vital part of operating a business online. TIBCO serves companies in the energy, manufacturing, retail, healthcare, and financial services industries. The company operates on a global basis, maintaining two dozen offices outside North America in Asia, Europe, the Middle East, Africa, and South America.
Vivek Ranadive, described as "a true visionary in a valley full of seers," by the August 10, 2004 issue of Information Age, left Bombay at age 17 with enough money to last two months. The year was 1958, and Ranadive was headed to Cambridge, Massachusetts, where he had been accepted at the Massachusetts Institute of Technology (MIT). Ranadive excelled in the academic world, earning an undergraduate degree in electrical engineering and computer science and a master's degree in engineering at MIT before crossing the Charles River to Allston, Massachusetts, where he earned a master's degree in business from Harvard Business School. After completing his education, Ranadive joined Ford Motor Co., where he served as a manager and an engineer. Stints as a senior executive at Fortune Systems and M/A-COM Linkabit followed, leading to the start of his entrepreneurial career and the genesis of TIBCO.
A quarter-century after leaving his native India, Ranadive was ready to launch his own information technology company. He was interested in technology that allowed the delivery of electronic information to users as the information became available, which described the essence of what later became Ranadive's "The Information Bus," or TIB. It was the mid-1980s, a point in Ranadive's career at which a well-paying investment banking position was offered to him, but he rejected a job at Goldman, Sachs & Co. and directed his energies toward starting his own company. While a friend worked on developing a prototype TIB, Ranadive began searching for start-up capital in northern California, registering little success until he approached Teknekron Corp. in late 1985. The company, described as an "entrepreneurial hothouse" in the February 1994 issue of Wall Street & Technology, agreed to back Ranadive's venture, but not in the usual fashion. "Teknekron isn't a venture capital company," Ranadive explained to Wall Street & Technology. "They told me the operating model and set a level of profitability. They said, 'You have to hire people smarter than you.'" According to the agreement between Ranadive and Teknekron, if profits failed to materialize after a set date, the venture would be shuttered and Ranadive could walk away debt free. If profits did materialize, Teknekron would recoup its investment and retain an ownership stake in the company. Under the terms of the agreement, Teknekron Software Systems Inc. (TSS) was formed in 1985, the company that later became TIBCO.
TSS succeeded during its early years because of a combination of talent and technology. Ranadive, following his financial backers' order to find people smarter than himself, solicited help from faculty members and friends at MIT. He also turned to the nearby talent pool at Stanford University and the University of California at Berkeley, gathering a small staff of academics to finish work on TIB technology. Under Ranadive's direction, the team developed software infrastructure to integrate and to deliver market data under the name Marketsheet, a product that used TIB technology to deliver stock quotes, news, and other financial information in trading rooms of large banks and financial institutions. The product proved to be an immediate success, embraced by the financial institutions who clamored for real-time information. In little more than five years, TSS's software could be found on more than 10,000 desktop computers worldwide, used by brokers and analysts at financial firms such as Salomon Brothers, Goldman, Sachs & Co., Fidelity Investment Services, and J.P. Morgan & Co. By 1992, revenues reached $39 million, from which the company earned $8 million in profits.
THE TIBCO NAME IS BORN IN 1996
Encouraged by the initial success of his venture, Ranadive began to address a larger audience, leading TSS in a direction that would later describe TIBCO's business. In 1992, the company expanded its product line to include software solutions for companies outside the financial services sector. TSS began to develop software that helped companies manage the often disparate software applications that supported their business. "Our vision was that it be an information highway, providing a mechanism to tie software applications together, not just to trade and provide market data," Ranadive explained in a February 1994 interview with Information Age. The event that eventually led to the birth of the TIBCO name occurred shortly before Ranadive's interview with Information Age. In December 1993, Ranadive sold TSS to the global financial news and information group Reuters Holdings PLC for $125 million. Reuters, the world's leading provider of real-time market data, international news, and transaction services, wanted to integrate Ranadive's TIB technology with its Triarch 2000 trading system. Under the terms of the deal, Ranadive was given the authority to run TSS independently. In 1996, TSS changed its name to reflect the patented technology that served as its backbone, adopting TIBCO Inc. as its official corporate title.
In the wake of the name change, Ranadive pushed for the division of his company, the final step in the process that gave birth to the TIBCO of the 21st century. Ranadive wanted to pursue the development of integration software for customers outside the financial services sector, a desire that led to the formation of TIBCO Software Inc. in January 1997. TIBCO Software became a separate entity from TIBCO Inc., which changed its name to TIBCO Finance Technology Inc. after the split. TIBCO Finance remained a wholly owned subsidiary of Reuters, focusing its business on providing TIB technology-based software to the financial services and insurance industries. TIBCO Software, with Ranadive serving as president, chief executive officer, and chairman, licensed TIB-technology from Reuters, which retained a 49 percent stake in the newly formed company.
TIBCO is focused on leveraging and extending the capabilities of its software to help companies move toward predictive business: an exciting new way of doing business that lets companies anticipate customer needs, create opportunities and avoid potential problems. As the basis of the real-time movement of data across the enterprise, TIBCO's software is uniquely capable of correlating information about a company's operations and performance with information about expected behavior and business rules so they can anticipate and respond to threats and opportunities before they occur.
In moving TIB technology off the trading floor, Ranadive offered corporate clientele what he perceived as an indispensable tool. Companies typically used a variety of applications to handle different corporate functions, but the disparate pieces of software often did not communicate with each other effectively. Ranadive, through TIB technology, sought to write code to connect the motley assortment of software programs used by companies, creating a seamless platform that operated efficiently on a real-time basis. A single purchase, for instance, could affect information related to order entries, logistics, inventories, and budgets, all of which had to be tied together. "You can have all the pretty pictures you want on the front end," an analyst remarked in a June 6, 2001 interview with Investor's Business Daily, "but if they don't connect to the back end to complete a transaction, you've got nothing. This stuff isn't sexy," the analyst said of integration software, "but it's the glue."
TIBCO's role as an intermediary that provided the middleware to help companies manage their businesses became increasingly important as the 1990s progressed. By carving out the sales recorded within the financial services sector by its predecessor, TSS, the company generated $8 million in revenue in 1992, the first financial figure recorded by the business TIBCO Software later represented. By 1996, the total reached $30 million, as the complexity and diversity of applications used by businesses increased. The spark that ignited an unprecedented rate of financial growth was the rapid development of e-commerce, which created a greater need for integrated software to not only enable a company to operate its assortment of applications and databases in concert, but also to extend its system to business partners and to customers. As online business ratcheted up during the late 1990s, TIBCO's sales grew robustly, reaching $52 million by 1998, when it was promoting its TIB/ActiveEnterprise suite of products. The software facilitated the distribution of data and the integration of business processes across local or widearea networks, including the Internet, allowing multiple and distinct applications, web sites, databases, and other content sources to be managed in real-time within a common framework. Touting the benefits of such technology, the company cashed in on the burgeoning growth of e-commerce and completed an initial public offering (IPO) of stock in 1999.
The months before and after TIBCO's IPO encompassed the most energetic growth the company had ever experienced. The increased need for integration software attracted a host of competitors, such as webMethods Inc. and SeeBeyond Technology Corp., but the biggest rival to TIBCO was International Business Machines Corporation (IBM), which controlled an estimated 25 percent of the market with its MQSeries software. The rewards to be won in the race for market share were escalating at a rapid pace, with global sales of integration software totaling $1.6 billion in 2000 and expected to reach nearly $9 billion by 2004. Ranadive forged ahead with highly regarded technology, an asset that he strengthened by fleshing out his company's expertise via acquisitions. In 1999, TIBCO bought InConcert Inc., a developer of integration software geared for telecommunications companies. When Ranadive acquired software vendor Extensibility Inc. the following year for $100 million, TIBCO's market valuation towered at more than $30 billion. One year later, in 2001, revenues reached $322 million, more than six times the total registered three years earlier.
- Teknekron Software Systems Inc., which later created TIBCO Software Inc., is formed.
- Teknekron Software begins courting customers outside the financial services sector.
- Teknekron Software is acquired by Reuters Holdings PLC.
- Teknekron Software changes its name to TIBCO Inc.
- TIBCO Inc. is split into two companies, TIBCO Finance Technology Inc. and TIBCO Software Inc.
- TIBCO Software completes its initial public offering of stock.
- Reuters cuts its ownership interest in TIBCO Software from 49 percent to less than 10 percent.
- Revenues reach a record high of $445 million.
TIBCO largely escaped the devastation caused by the collapse of the high-technology sector at the turn of the millennium. The company's market valuation incurred the most severe blow when the Internet "bubble" burst, plummeting from $30 billion to slightly more than $1 billion in less than three years. Sales fell as well, dropping by 20 percent, but the company soon recovered, avoiding the brunt of the storm. In 2002, the company returned to an acquisition mode, purchasing two companies. The first and the larger of the two was Talarian Corp., a developer of infrastructure software. TIBCO paid $155 million for Talarian in April, gaining access to the company's 300 customers, which included prominent firms such as Boeing, Hewlett-Packard, and Southwest Airlines. In September, TIBCO signed an agreement to acquire Praja, Inc., a developer of business-activity monitoring software, which enabled users to as-sess real-time business operations against key performance indicators. TIBCO paid nearly $3 million for Praja.
2004: ACQUISITION OF STAFFWARE
In the final years before its 10th anniversary as an independent company, TIBCO continued to expand and to strengthen its business under the watchful eye of Ranadive. By 2004, the company ranked as the largest, independent integration software developer. Sales for the year reached $387 million, surpassing for the first time the record high posted in 2001. Early in the year, the company's prospects brightened when Reuters reduced its ownership stake from 49 percent to 8.8 percent, a move that allowed TIBCO to return to its roots and begin seriously assaulting the financial services sector. In April 2004, the company announced another acquisition, its first since purchasing Praja. The $217 million transaction involved Staffware PLC, a U.K.-based developer of workflow-management and integration software. The addition of Staffware broadened TIBCO's product offerings, adding roughly 700 customers in the banking, insurance, and telecommunications industries, but perhaps the most significant benefit of the deal was Staffware's strong presence overseas. "We are stronger outside North America and parts of Asia," Staffware's chairman and chief executive officer, John O'Connell, explained in an April 23, 2004 interview with the Daily Deal. "TIBCO is clearly stronger in North America," O'Connell added, "and we can help them more outside the United States." The addition of Staffware helped TIBCO generate $445 million in revenue in 2005. Profits for the year totaled $72.5 million, up substantially from the $44.9 million posted the previous year, making for a highly profitable end to the company's first decade of business.
3301 Hillview Holdings Inc.; TIBCO BPM (U.K.).
BEA Systems, Inc.; International Business Machines Corporation; webMethods, Inc.
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