TIBCO: Ripe For Picking?

If William Harnisch sees a dive in a stock he believes in, he buys more. He did that with TIBCO Software (TIBX ), whose shares tumbled from 12 in mid-February to 7 on Mar. 2 -- after the company disappointed the Street with dismal quarterly profits. On Apr. 20 the stock was at 6.83. But Harnisch is betting on a comeback -- and maybe a buyout. TIBCO's software lets companies integrate their systems and Web applications with those of customers. Its main rival is IBM (IBM ). "If TIBCO continues to disappoint, bigger players will make a move on it," says Harnisch, whose hedge fund, Peconic Partners, owns 4.5 million shares. Harnisch resigned as chairman of investment firm Forstmann-Leff in January to work full-time at Peconic, which he founded in 1990. John DiFucci of Bear Stearns (BSC ), which has done banking for TIBCO, says that despite low quarterly earnings of 5 cents a share, vs. an expected 7 cents -- caused by poor results in Europe -- operating cash flow jumped 24%, and licensing revenues leaped 63%. Total sales rose 47%. And he sees growth ahead. DiFucci rates the stock "outperform" with a 12-month target of 11. He sees it earning 30 cents a share in 2005 and 41 cents in 2006, vs. 2004's 25 cents. Some pros believe TIBCO might attract the likes of Oracle (ORCL ) or SAP (SAP ), which compete with IBM. In a buyout, Harnisch figures the stock is worth 13 to 15. TIBCO, Oracle, and SAP did not return calls.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

    Before it's here, it's on the Bloomberg Terminal.