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TIBCO’s Tumble: Red Alert for Software Stocks

Beware -- enterprise software is in the midst of growth rate reset


Scared_afraid_concerned_business_manBack in September, TIBCO (NASDAQ:TIBX) stock reached $32. But since then, there has only been pain. Adding to it, in today’s trading the stock is off by 23% to $19.07.

TIBCO software helps companies manage complex data structures. Over the years, the business has been strong because of cloud computing and mobile.

Yet TIBCO is running into some headwinds. The company warned that the current quarter will see adjusted revenues of 37 cents to 38 cents, with revenues of $292 million to $295 million. The Street was looking for earnings of 44 cents and revenues of $315.9 million.

Yes, this is a big-time miss. And it should be no surprise in light of the general weakness in the tech world. Companies like IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC) have all reported muted outlooks for Q4.

TIBCO noted that it’s seeing weakness in the Americas. With the expected cutbacks in government spending — on the federal and state levels — a slowdown seems inevitable.

As a result, investors are dumping the share of other software operators as well, with declines of 2% to 3% in today’s trading. Examples include companies like Citrix Systems (NASDAQ:CTXS) and VMware (NYSE:VMW). Even mighty Oracle (NASDAQ:ORCL) is off about 3%.

It’s tempting to jump in and find some bargains. But when a sector is undergoing a reset of its growth rate, it’s usually a better idea to wait. It’s a good bet that the valuations will get even more attractive.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”  Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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