The Business Intelligence (BI) index continues to outpace the broader market indexes with YTD gains of 28.4%. The attached chart (click on the image to see a larger version) compares these indexes with broader market indexes along with a select set of high tech ETFs. High tech, as we has discussed, is currently the industry leader for the year and is likely to provide leadership with an upward market.
Three companies in the BI/DW reported results last week (see below). Although none of these companies reported great news, they generally beat, albeit reduced, expectations. All mentioned constrained IT spending and currency headwinds negatively impacted their quarterly results. IT budgets appear to be stabilizing, but we are in the summer quarter, which is typically weak (vacation time often slowing sales cycle and project start dates).
It would appear a rebound in IT spending would not happen before Q4 2009 and more likely in 2010, at which point vendors’ performance will also look better due to comparisons with weak year-over-year quarterly comparisons. A quick recap of quarterly earnings:
Progress Software (PRGS) reported, on a GAAP (generally accepted accounting principles) basis, a 9% drop in sales (up 1% on a constant currency) year-over-year led by a 14% decline (-7% in constant currency) in new software license revenue. Software license revenue is a closely watched metric because it is an indicator of future revenues such as upgrades, maintenance and services. GAAP operating income decreased 44%, however, excluding restructuring and other costs, the company earnings beat the average forecast from analysts in a Thomson Reuters poll. Progress Software’s CEO stated that "Our results reflect the difficult economic environment and unfavorable year-over-year currency rates."
Tibco Software (TIBX) reported revenue declining 5% (-1% on a constant currency basis) over the prior-year quarter with a 13% drop in license revenue (-5% on a constant currency basis.) With significant expense reductions, Tibco’s operating margins increased to 9.8% from 2.7% and its second-quarter profit nearly tripled.
Oracle (ORCL) beat Wall Street expectations for sales and profits when announcing their recent quarterly results. Sales declined 5% and profits fell 7% (on a constant currency basis sales increased 4% and profit was up 5%). New software licenses sales were down 13% (but -4% on a constant currency basis). Its margins, like the others reporting, increased because of expense management but also because of a shift to a higher percentage of revenue coming from maintenance contracts. These annual fees accounted for 44% of Oracle’s revenue and boasted its operating margins to 51%.
fyi: The business intelligence (BI) index is calculated on an equal-weight representation based on closing prices as of 12/31/07.
Disclosure: The analyst or his family does have current stock positions in the following companies listed in this index: INFA, NZ, ORCL, TDC, TIBX, SAP