Are Tibco and SAP Bad for Tableau?

On Tuesday, shares of TIBCO Software  soared nearly 7% after reports surfaced that software giant SAP might be looking to acquire the company. While acquisition rumors often sprout, this is one that seemingly makes sense, especially following a recent interview with TIBCO CEO, Vivek Ranadive, and his thoughts on both the industry and peer Tableau . Pricing might be the only issue, but if a deal is made, Tableau investors should begin to worry.

What's the rumor?
According to a report in the German publication Der Aktionaer, various contacts have confirmed that SAP is interested in acquiring TIBCO, although it's unknown if formal talks have yet to take place. SAP is an acquisitive company, and acquiring TIBCO would boost its middleware unit; TIBCO's middleware segment grew 18% in the last quarter.

SAP spent $7.7 billion in 2012 to acquire Ariba and SuccessFactors, which gave it a cloud-computing segment, thus leaving speculation that a big data acquisition is highly likely. Therefore, with TIBCO having a long-lasting history in big data, and a $3.5 billion market capitalization, such an acquisition appears possible.

Interview reflection
Interestingly, this report comes 10 days after my interview with TIBCO CEO Vivek Ranadive. In reading the interview, reasons why SAP might find TIBCO attractive become clear. Specifically, this particular interview was in regard to TIBCO's data visualization platform, Spotfire, and the rise of Tableau, which has emerged as a Wall Street favorite in big data.

Lately, Spotfire's revenue growth has fallen to single-digits, while, Tableau's revenue continues to nearly double, including licensing revenue, which rose 93% last quarter. However, Ranadive doesn't attribute Tableau's performance to any major product advantage, but rather cheap pricing that causes the company to lose money.

Moreover, Tableau has made purchasing its product via credit card a relatively simple process, while TIBCO's Spotfire deals mainly with enterprise clients and can cost far north of six digits for its customers. Therefore, TIBCO's core problem, as Ranadive mentioned, is making Spotfire more affordable and easier to purchase with a credit card, while keeping high-end customers happy.

Furthermore, investors should note that Spotfire is the only fast-data platform available today, providing updated data and real-time analysis, which is also what makes it so pricey. Combining this asset with SAP's large network of enterprise customers, it's no wonder the company might consider TIBCO as a valuable asset.

What does this all mean?
To conclude, there's no denying that Spotfire's revenue has fallen in comparison to Tableau. But, as Ranadive noted, Tableau's growth will likely become much more difficult once it reaches the $350 million annual revenue point. Tableau's 12-month revenue currently sits at $267 million because TIBCO will start "tightening up" on Tableau, as will the overall data visualization market.

Assuming Ranadive makes a product that's less advanced, perhaps not in real time, that can be purchased by credit card, he's likely right in that it will cut into Tableau's business. Moreover, acquirers will become interested, especially ones like SAP with the opportunity for synergies.

One thing that might prevent this acquisition is determining a fair buyout price. Ranadive believes his company is significantly undervalued, saying that, based on Tableau's stock, TIBCO's valuation should be double what it is. Therefore, TIBCO and SAP will have to find common ground, which could be lengthy. But, if so, this "tightening up" on Tableau could happen much sooner and be significantly more impactful than investors expect.

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Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Tibco Software. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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