Tibco Software Inc, the Palo Alto, California-based, real-time middleware company, will float as a public company still shackled to its majority shareholder, UK-based information provider Reuters Plc, in a manner likely to cause long-term tensions between the two companies. A target price of between $9 and $11 a share has been set for next month’s […]
Tibco Software Inc, the Palo Alto, California-based, real-time middleware company, will float as a public company still shackled to its majority shareholder, UK-based information provider Reuters Plc, in a manner likely to cause long-term tensions between the two companies.
A target price of between $9 and $11 a share has been set for next month’s planned IPO. But in a regulatory filing, Tibco said that it licenses to Reuters, on a royalty-free perpetual basis, all intellectual property and products created until December 2011. This, it acknowledges, will place Reuters in a position to more easily develop products that compete with our product offerings.
Moreover, Reuters is entitled to embed Tibco’s technology into its product offerings, though Reuters must pay Tibco product fees if it resells any products on a stand-alone basis.
Under terms of its deal, Tibco can’t compete with Reuters in the lucrative financial markets. While Reuters has to pay Tibco a percentage of fees from sales, Tibco says these could be materially less from what it could get from other distributors or resellers. This is a sizable chunk of the potential market, as Tibco says product fees from Reuters will have a significant effect on results at least until end of 2001.
Reuters will be the main beneficiary of Tibco’s plans to raise $60m in an offering that will value the company at up to $638m. With 69% of the shares, Reuters Plc will remain the dominant shareholder while Cisco Systems Inc will hold around 20% of the stock.
Tibco has been growing rapidly with revenue that rose 49.5% to $52.7m in 1998, although the net loss was up from $4.6m to $12.9m. No quick breakthrough into profitability is likely. Tibco expects to continue to spend substantial resources developing existing and new software products and on expanding sales and marketing activities.
Tibco says its patented technology, called The Information Bus (TIB), allows multiple distinct applications, web sites, databases and other content sources to be integrated and managed in real-time within a common framework.
But Tibco is in an extremely competitive and rapidly-changing market,, fighting it out with IBM, New Era of Networks, Iona and BEA in the messaging component market and Vitria, CrossWorlds, STC and Active Software in other components. Tibco reckons that IBM has the potential to offer the most complete set of products for application integration.
Teknekron Software Systems Inc, the company that eventually became Tibco, was acquired by Reuters in 1994, attracted by a software infrastructure for the integration and delivery of market data in trading rooms of large banks and financial services institutions. Now Reuters will get a financial boost from the flotation while retaining the right to profit from one of the biggest markets for Tibco’s products.