Up until this point, Tableau Software has been one of the fastest growing software companies in the market, and has generated a substantial amount of investor demand. However, some industry insiders believe that growth could slow as the company heads into 2015.
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Time to tighten up for Tableau
Back in May I spoke with Tibco Software CEO Vivek Ranadive, who had some interesting things to say about his competitor.
Ranadive explained that the big data industry is separated into two key markets: "There are two types of data, slow and fast. What makes Tibco unique is that we're the only company that utilizes fast data, which helps our customers make an offer to their consumers before they leave the store, rather than six months afterwards." He added, "not all big data is the same; slow data is keeping information stored and then using it at a later time."
In essence, Tableau is slow-data, which Ranadive believed is inferior. However, Tableau's software is also simple to use. While Tibco's software is very expensive and complex, targeting only large enterprise customers that can pay north of seven figures annually, Tableau has made big data easily accessible for small, medium, and large sized businesses.
Nonetheless, Ranadive insists that Tableau's success is more a result of cheap pricing. Therefore, when asked about Tableau's growth prospects, Ranadive went on to say, "I think (Tableau) could probably get to the $350 million mark easily based on the size of the market, but then it's going to start tightening up really fast."
This statement is interesting for two reasons: Ranadive was one of the pioneers of big data with Tibco, meaning he knows the industry well, if not better than anyone. Second, Tableau is now at the $350 million mark in trailing 12-month revenue, having just surpassed it following the company's most recent quarter.
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3 good things
While Ranadive might be pessimistic about Tableau's outlook, current shareholders should be excited about three things from the third quarter.
First, Tableau's license revenue represents 67% of its total sales, and it grew 66% year over year to nearly $70 million. This represents the beginning of long-term business that should become recurring revenue. Further, from the 2,500 new customer accounts added in the quarter, up from 2,300 in the second quarter, 200 were valued at greater than $100,000, meaning Tableau's software is cutting into Tibco's niche market.
Second, Tableau's second quarter revenue of $104 million tracks well above the $350 million annually that Ranadive noted as a peak growth figure. Not to mention, the $120 million it expects in the fourth quarter indicates that Tableau does not see growth slowing in the immediate future.
Lastly, in looking to 2015, Tableau expects revenue growth of 40%. This exceeds the 37% annual growth that Wall Street analysts expect. That'll take annual revenue well over $550 million.
Unless Tableau management is incapable of gauging the performance and demand of their own business, all indications suggest that Ranadive was wrong about his outlook for Tableau.
The one area of concern is Ranadive's knowledge of big data, the industry itself, and market trends. He suggested that the market would tighten up fast on Tableau, implying it would be sudden, or unexpected. Investors should be encouraged by the company's growth, but mindful of the Ranadive's expectations.
The article What Tableau Investors Need to Monitor In 2015 originally appeared on Fool.com.
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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