TIBCO Faces Shareholder Suits

Best known for its Enterprise Message Service, TIBCO Software is having much less success with its BPM efforts.

Best known for its Enterprise Message Service, TIBCO Software Inc. is having much less success with its BPM efforts.

TIBCO, of Palo Alto, Calif., faces five shareholder lawsuits alleging the faulty integration of Staffware plc., the business process management software developer TIBCO acquired in April 2004 for $217 million. The total cost of the acquisition was about $245 million—an expenditure that has not paid off for investors, according to the case filed by Milberg Weiss Bershad & Schulman LLP, in New York.

Two weeks ago, TIBCO reported its second-quarter earnings, which added up to a $30 million shortfall from guidance issued during the previous quarter. Total revenues for the second quarter were $101.4 million, while license revenues were $41.8 million.

"We are painfully cognizant of the fact that we had two bad quarters. We just want to make sure we do what we say we are going to do for this quarter," said TIBCO Chairman and CEO Vivek Ranadivé, during the second-quarter earnings conference call. "We do acknowledge that deals have been pushed out; they have been prolonged."

The issue, according to Milbergs complaint, is that the addition of Staffware, based in London, would enable TIBCO to offer its users BPM software and deepen its expertise in a number of vertical markets. At the same time, the acquisition would enable TIBCO to sell more software in new regions where Staffware is prevalent, particularly in Europe and Asia.

The suits allege that by the fourth quarter of last year, TIBCO had failed to integrate Staffwares "leadership, operations or sales force" and yet continued to assure investors and customers that its plan was moving ahead as scheduled, according to the complaint. The lawsuits against TIBCO also allege that not only did TIBCO know about the botched integration of Staffware but also that the company tipped off some investors prior to its first-quarter earnings call in March.

It was during the earnings call this spring that Ranadivé revealed that Staffware was not only unintegrated but that the condition had resulted in stagnant European sales. To date, TIBCO officials say they have met all the initial product timelines and that the general integration of Staffware was completed in the fourth quarter of last year.

The issue, according to Murat Sonmez, executive vice president of strategic markets at TIBCO, was more a cultural clash between the sales teams in Europe. "Staffware is a U.K.-based firm, and we grew up in Silicon Valley with Nasdaq," said Sonmez. "I wouldnt say [sales] halted, but when you look at the numbers, theres definitely a decline. It was a confusion with the sales management we had in place. Because of the confusion, we focused more on internal matters versus what the market wanted, what the customers wanted."

To solve the problems, TIBCO put a new executive vice president in place in Europe, laid off employees and consolidated in other areas. But the trouble is not over. On July 25, the judge overseeing the separate cases against TIBCO will combine them and name a lead plaintiff.


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