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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended November 30, 1999
Commission File Number: 000-26579
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TIBCO SOFTWARE INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0289509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3165 Porter Drive, Palo Alto, CA 94304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 846-5000
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title of Class)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of December 15, 1999, there were 181,228,026 shares of the Registrant's
Common Stock outstanding, and the aggregate market value of such shares held by
non-affiliates of the Registrant (based upon the closing sale price of such
shares on the Nasdaq National Market on December 15, 1999) was approximately
$2,297,428,775. Shares of common stock held by each executive officer and
director and by each entity that owns 5% or more of the outstanding common
stock have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Registrant's Annual Report to Stockholders for the
year ended November 30, 1999 (the "1999 Annual Report") are incorporated by
reference in Parts II and IV of this Form 10-K to the extent stated herein.
Also, certain sections of the Registrant's definitive Proxy Statement for the
2000 Annual Meeting of Stockholders to be held on April 12, 2000 are
incorporated by reference in Part III of this Form 10-K to the extent stated
herein.
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TIBCO Software Inc. Form 10-K
For the Fiscal Year Ended November 30, 1999
TABLE OF CONTENTS
Part I
Item 1. Business................................................... 3
Item 2. Properties................................................. 13
Item 3. Legal Proceedings.......................................... 13
Item 4. Submission of Matters to a Vote of Security Holders........ 13
Part II
Item 5. Market for the Company's Common Stock and Related
Stockholders Matters....................................... 14
Item 6. Selected Financial Data.................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 14
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.. 14
Item 8. Financial Statements and Supplementary Data................ 14
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 14
Part III
Item 10. Directors and Executive Officers of TIBCO Software Inc..... 15
Item 11. Executive Compensation..................................... 15
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 15
Item 13. Certain Relationships and Related Transactions............. 15
Part IV
Item 14. Exhibits, Financial Statements Schedule, and Reports on
Form 8-K................................................... 16
Signatures................................................. 18
Financial Statement Schedule............................... 18
Exhibit Index.............................................. 19
2
PART I
Item 1. Business
The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Predictions of future
events are inherently uncertain. Actual events could differ materially from
those predicted in the forward-looking statements as a result of the risks set
forth in the following discussion and, in particular, the risks discussed below
under the caption "Factors that May Affect Operating Results."
Overview
We are a leading provider of eBusiness infrastructure software products that
enable business-to-business, business-to-consumer and business-to-employee
solutions. Our software products that enable businesses to link internal
operations, business partners and customer channels in real-time. Our software
products allow multiple distinct applications, web sites, databases and other
content sources to be integrated and managed within a common framework. Our
products also enable enterprises to extend their information technology
infrastructures and business processes across the Internet to conduct all forms
of electronic business using the Internet: business-to-business, business-to-
consumer and business-to-employee. Our core technology, known as The
Information Bus or the TIB, is an integration platform that enables enterprises
and users to automatically transmit, receive, filter and personalize digital
information in real-time. The Information Bus also facilitates real-time, two-
way communications between distributed computer networks and mobile information
devices such as hand-held computers, pagers and digital cellular phones. Our
products are currently in use by over 300 companies in diverse markets such as
telecommunications, manufacturing, energy, financial services and internet
portals.
Driven by accelerating competition and the increasing demands of customers,
many enterprises today are seeking to expand and improve the scope, speed and
efficiency of their business processes by using the Internet to become
eBusinesses. An eBusiness is a company that integrates its disparate
applications and information sources, connects with customers, partners and
employees using the Internet and engages in commerce with business-to-business,
or B2B, or business-to-consumer, or B2C and business-to-employee, or B2E
communities. Just as markets are becoming increasingly global and corporate
relationships become increasingly complex, the business environment today
demands a more tightly integrated network of supplier, customer and partner
relationships. Emerging challenges and opportunities are forcing businesses to
become more efficient, in many cases by adjusting their operations and
strategies in real-time. The timely exchange of information across intranets
and the Internet provides opportunities to leverage management resources,
create manufacturing efficiencies and improve customer service. For example,
real-time business process integration and information exchange with suppliers
and customers over the Internet expedites order fulfillment, decreases
inventory carrying costs, and provides enhanced sales opportunities through
direct customer interaction.
Our solution allows multiple computer applications and platforms to
communicate in real-time across the Internet and intranets. The TIB technology
facilitates the distribution of information and the integration of business
processes by connecting each application to the network through a single
interface, instead of linking each application directly to all others. The
benefits of the TIB technology are realized through our integrated suite of
software products. These products provide support for a broad range of key
eBusiness technologies such as eXtensible Markup Language, or XML, an emerging
standard for sharing data over the Internet, and related XML e-Commerce
frameworks, such as RosettaNet.
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Our objective is to establish the TIB technology as the leading software
solution for eBusiness infrastructure. The core elements of our strategy
include enhancing our position as a provider of portal infrastructure, pursuing
a license driven business strategy, leveraging our vertical market expertise,
capitalizing on the presence of Reuters in the financial services industry,
expanding our international presence and continuing to enhance our technology
and products.
The TIB Products
TIB Product Suite
The TIB products can be deployed individually or as an integrated solution.
Support for eBusiness protocols and standards such as XML, along with XML
eCommerce frameworks such as RosettaNet, is incorporated throughout our
products. Our products provide the following key elements of eBusiness
infrastructure:
. Messaging--enables the movement of information and facilitates
transactions between applications, databases and portals.
. Connectivity--integrates various legacy and third party applications by
connecting them to a common eBusiness infrastructure.
. Information Transformation and Flow Management--manages the conversion
and translation of data and controls the flow of information and the
interaction of business processes within and between enterprises.
. Monitoring and Management--provides the means for the enterprise to
administer its applications environment and ensure reliable operations.
. Content Display--provides the display console through which users are
notified of and view business event information.
Messaging (Events, Data & Transactions)
Our messaging products are the foundation of our product suite. These
products simplify the problem of integrating diverse computer applications by
connecting each application to the network with a single interface, instead of
linking each application directly to all others. Our products support a wide
range of communication models, including the use of XML-based messages. Our
three complementary messaging products are described below:
. TIB/Rendezvous is our flagship messaging product. TIB/Rendezvous
supports publish/subscribe as well as request/reply messaging, and
facilitates personalized information delivery. TIB/Rendezvous leverages
the networking protocols of the Internet to offer a range of service
levels in the delivery of information and the execution of transactions.
TIB/Rendezvous provides efficient, reliable information delivery and
high scalability, and can be embedded in an enterprise's existing
information system.
. TIB/ETX is a transaction-based messaging system designed for use in
environments that require a greater degree of transaction management and
control than is provided by a standard messaging solution. TIB/ETX
provides a transactional form of publish/ subscribe messaging similar to
traditional computer transaction models.
. TIB/ObjectBus is our object request broker, or ORB. ORBs enable computer
systems to operate more efficiently by employing reusable, self-
contained pieces of software code known as objects. TIB/ObjectBus allows
our TIB products to integrate with CORBA 2.0, a major programming
standard for object-oriented applications. TIB/ObjectBus can be fully
integrated with our messaging software, combining the efficiency of an
object oriented computing model with the scalability, performance and
ease of use benefits of TIB/Rendezvous.
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Connectivity
TIB/Adapters are our software components that link applications to the TIB
environment, thus enabling these applications to communicate with each other.
We take an innovative approach to application integration by using a
TIB/Adapter as the single point of integration for the application. Our
TIB/Adapter products connect leading enterprise applications and complementary
middleware products to the TIB environment. We offer a series of standard
TIB/Adapters designed to link applications and other software developed by SAP,
Siebel Systems, PeopleSoft, IBM and Oracle, among others, to the TIB. We also
have a software toolkit, the TIB/Adapter SDK, that allows our customers and
systems integrators to build custom TIB/Adapters to link applications to the
TIB environment. The TIB/Adapter SDK product provides a common framework for
the rapid development of new TIB/Adapters.
Information Transformation and Flow Management
In order to facilitate the efficient movement of information across
enterprise applications, a solution must have the ability to translate content
from one format to another--including XML and proprietary message types--and to
effectively govern the manner in which information flows between applications.
Our transformation and process flow management products translate data from
each application into a format that is understood by other applications as
described below:
. TIB/MessageBroker is our scalable message routing and transformation
system. TIB/MessageBroker combines and transforms data from applications
into formats that can be understood by other applications, and routes
data according to pre-defined rules. TIB/MessageBroker also allows an
enterprise to conduct transactions and exchange information with
customers and business partners. Unlike many competing technologies,
TIB/MessageBroker requires no independent database or third-party
messaging system.
. TIB/IntegrationManager controls the flow of information and system-to-
system communication among applications and components in the TIB
environment. TIB/IntegrationManager allows the enterprise to define
business rules that govern information processing between applications
and where information should go and under what conditions.
TIB/IntegrationManager coordinates the message transport and
transformation functions of the TIB products for internal process
automation and B2B trading systems.
. TIB/InConcert allows the definition of document-oriented process
workflow, as specified through graphical user interfaces.
TIB/IntegrationManager manages and executes automated system-to-system
processes, while TIB/InConcert manages and executes the document-
oriented workflows that involve human and computer processes. Together
TIB/InConcert and TIB/IntegrationManager span the full range of
requirements for process and workflow automation and execution within
and between enterprises.
. TIB/BusinessConnect, scheduled for release in the second quarter of
fiscal 2000, is a server software product built around TIB/Integration-
Manager and TIB/MessageBroker that will enhance our capabilities for B2B
trading activities and simplify the implementation of B2B solutions.
TIB/BusinessConnect is used to define trading relationships through a
graphical user interface and then execute the resulting transactions
between trading partners. TIB/BusinessConnect supports the core
technologies and standards for B2B eCommerce.
Content Display
To conduct business in real-time, an enterprise must have the ability to
provide a simple display tool for users to access and view business event
information. Our products in this area are designed to combine information from
the TIB environment with content from external sources, such as web pages, to
create an
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integrated display that can be personalized to the specific needs of the end-
user. Our content display products are described below:
. TIB/ContentBroker aggregates information from enterprise applications,
corporate web sites and other content sources based on an enterprise's
preferences, and delivers the requested information directly to users'
desktops as soon as it becomes available. TIB/ContentBroker reduces the
need for enterprises to support multiple end-user interfaces when users
request information from various sources.
. TIB/EventConsole is a display for users to view the content aggregated
by TIB/ContentBroker. TIB/EventConsole provides personalized
notifications from enterprise information sources, including databases,
document servers, web servers, enterprise resource planning systems and
legacy systems, directly to the desktop computers of the appropriate
users. TIB/EventConsole also enables users to receive up-to-date
information remotely.
Monitoring and Management
TIB/Hawk is our product for monitoring and managing applications. Through an
intuitive graphical user interface, TIB/Hawk can be configured to monitor
systems and applications in a local or wide area network and act autonomously
when pre-defined conditions occur.
TIBCO.NET and TIBCO Portal Products
TIBCO.net
As part of our strategy to extend the reach of our products, TIBCO.net
provides a solution for the creation, monitoring and administration of
demanding, high-performance platforms for eBusiness services, such as Internet
or enterprise portals or corporate web sites. Using our TIB products we can
create real-time, scalable information systems for our customers, such as the
financial information system we created for Yahoo!. TIBCO.net allows our
customers to combine internal business systems with external content, such as
news or market pricing data. Our customers in turn can bundle this information
for real-time delivery to their customers, suppliers, partners and employees.
In addition, TIBCO.net provides our customers with the ability to integrate and
deliver business information in real-time across the Internet through our
reliable multicast technology.
TIBCO.net represents a further evolution of the TIB products for use in
Internet-enabled businesses. TIBCO.net is offered to our customers either as a
TIBCO-hosted service, providing time-to-market advantages, or as a package of
products and services for implementation at the customer's site.
TIBCO.net, through its implementation of the TIBproducts, supports a broad
range of communications methods and protocols enabling the delivery of
information through a wide range of devices and presentation technologies,
including Internet browsers, pagers, hand-held computers and digital cellular
phones.
TIB/PortalBuilder
TIB/PortalBuilder, released in November 1999, provides the tools to create
and build eBusiness portals. TIB/Portal Builder provides portal users with the
ability to determine which content sources and services are delivered through a
portal and to configure how the content is displayed to portal users.
TIB/Portal builder can also work in conjunction with our TIB products to create
and manage the integration of content and services within a portal.
TIB/PortalBuilder allows personalized views of the portal to be created and
stored for each portal user. A graphical user interface is provided to business
users to make it easy to configure and define the content and services of a
portal. The first customer of TIB/PortalBuilder was mySAP.com.
TIB/PortalPaks
TIB/PortalPaks are packaged software components for connecting content
sources such as financial data, news, weather and sports. TIB/PortalPaks are
designed to reduce the time-to-market and effort for portal creation.
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Services
Professional Services
Our professional services offerings include a wide range of consulting
services such as systems planning, architecture and design, custom development
and systems integration for the rapid deployment of our TIB products. We offer
professional services with the initial deployment of our products, as well as
on an ongoing basis to address the continuing needs of our customers. Our
professional services staff is primarily located in Palo Alto, Virginia, London
and Sydney, enabling us to perform installations and respond to customer
demands rapidly across the Americas, Europe and Asia. As of November 30, 1999,
our professional services group consisted of 115 employees, including
individuals with domain expertise in the telecommunications, energy and other
industries. Many of our professional services employees have advanced degrees
and/or substantial industry expertise in systems architecture and design. We
expect that the number of service professionals and the scope of the services
offered will increase as we continue to address the expanding eBusiness
infrastructure needs of large organizations.
We have relationships with resellers, professional service organizations and
system integrators, including Deloitte Consulting, EDS, Ernst & Young, KPMG,
and Sapient, to cooperate in the deployment of our products to clients. These
relationships help promote our TIB products and provide additional technical
expertise to enable us to provide the full range of professional services our
customers require to deploy our products.
Maintenance and Support
We offer an array of software maintenance and support services to our
customers. Our support organization provides services seven days a week,
twenty-four hours a day. We have a worldwide support organization with key
operations centers in Palo Alto, London and Sydney to ensure global coverage
for our customers. These centers provide the infrastructure for our around-the-
clock call centers and hotline support.
We offer a range of support packages that allow our customers to choose the
level of support that fits the needs and budgets of their organizations.
Customers also have access to on-site support which is charged on a time and
materials basis.
Training
We provide training for customer personnel at our main office as well as at
customer locations. We also provide training for our professional services
partners to enhance their effectiveness in integrating our products. In
addition, we develop custom education programs to address the specific needs of
individual customers and partners.
Sales and Marketing
Sales
We currently market our software and services primarily through a direct
sales organization, complemented by indirect sales channels. As of November 30,
1999, our direct sales force included 40 commissioned sales representatives
located in 11 U.S. cities and in 12 locations internationally across North
America, Europe and Asia. We have established distribution and licensing
relationships with several strategic hardware vendors, database providers,
software and toolset developers, systems integrators and implementation
consultants. We have also developed alliances with key solution providers to
target vertical industry sectors, including energy, telecommunications,
manufacturing and Internet portals.
Under the terms of our license agreement with Reuters, we generally cannot
sell our products directly into the financial services market. Accordingly, we
generally sell our products to companies in the financial services industry
through third-party distributors and systems integrators. Reuters is the
preferred distributor of our
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products in that market. We believe that our distribution relationship with
Reuters, a global news and information group, has strengthened the penetration
of our products in the financial services industry. Product fees from Reuters
on its sales of our products in the financial services industry accounted for
16% of our revenue in fiscal 1999, 6% of our revenue in fiscal 1998 and less
than 1% of our revenue in fiscal 1997.
Marketing
We utilize a wide variety of marketing programs which are intended to
attract potential customers and to promote TIBCO Software and its brand names.
We use a mix of market research, analyst updates, seminars, direct mail, print
advertising, trade shows, speaking engagements, public relations, customer
newsletters, and web site marketing in order to achieve these goals. Our
marketing department also produces collateral material for distribution to
potential customers including presentation materials, white papers, brochures,
and fact sheets. We also host annual user conferences for our customers and
provide support to our channel partners with a variety of programs and training
and product marketing support materials.
Product Development
We have been granted a perpetual, royalty-free license to the underlying TIB
messaging technology as it existed on December 31, 1996. We have concentrated
our product development efforts since then both on enhancing this licensed
technology and on developing new products. We expect that most of our
enhancements to existing products and new products will be developed
internally. However, we will evaluate on an ongoing basis the acquisition of
externally developed technologies for integration into our product lines.
We expect that a substantial majority of our research and development
activities will be enhancing and extending our TIB products. Historically, our
product development efforts were focused on creating our core product
solutions. Our development focus has now shifted to expanding the number of
available TIB/Adapters and developing additional packaged integration solutions
for specific markets.
As of November 30, 1999, there were 149 employees in our research and
development organization. We expect that we will continue to commit significant
resources to product development in the future. To date, all product
development costs have been expensed as incurred.
Competition
The market for our products and services is extremely competitive and
subject to rapid change. In addition, we compete with various providers of
single components of application integration solutions, including IBM, New Era
of Networks, Iona and BEA with respect to messaging components and Vitria,
CrossWorlds, STC and Active Software with respect to other components. We also
compete in certain product areas with niche eBusiness connectivity companies
such as WebMethods and other emerging companies. We believe that of these
companies, IBM has the potential to offer the most complete set of products for
application integration. We also compete in certain product areas with niche
eBusiness connectivity companies such as WebMethods and other emerging
companies. We also face competition for certain aspects of our product and
service offerings from major systems integrators. We expect additional
competition from other established and emerging companies. In addition, we may
face pricing pressures from our current competitors and new market entrants in
the future. We believe that the competitive factors affecting the market for
our products and services include product functionality and features; quality
of professional services offerings; product quality, performance and price;
ease of product implementation; quality of customer support services; customer
training and documentation; and vendor and product reputation. The relative
importance of each of these factors depends upon the specific customer
environment. Although we believe that our products and services currently
compete favorably with respect to such factors, we may not be able to maintain
our competitive position against current and potential competitors.
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Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, product development and
marketing resources, greater name recognition and larger customer bases than we
do. Our present or future competitors may be able to develop products
comparable or superior to those we offer, adapt more quickly than we do to new
technologies, evolving industry trends or customer requirements, or devote
greater resources to the development, promotion and sale of their products than
we do. Accordingly, we may not be able to compete effectively in our markets,
competition may intensify and harm our business and operating results. If we
are not successful in developing enhancements to existing products and new
products in a timely manner, achieving customer acceptance or generating higher
average selling prices, our gross margins may decline, and our business and
operating results may suffer.
Our license agreement with Reuters does not prohibit Reuters from providing
enterprise infrastructure software products and services in competition with
us. Reuters currently sells our products to financial services companies and
creates products based on the TIB technology specifically for financial
services companies. In addition, pursuant to the license agreement, Reuters has
access to the source code for our products. Although Reuters currently does not
create TIB-based products designed for general use in all markets, if Reuters
were to decide to begin providing information integration products and services
in our markets, we would face additional competition for such customers.
Proprietary Technology
Our success is dependent upon our proprietary software technology. We
license the patents for the TIB technology underlying some of our TIB products,
including TIB/Rendezvous and TIB/ETX, from Reuters. Consequently, we can assert
infringement of these products only through Reuters or with the consent of
Reuters. While we have pending patent applications, we do not currently have
any issued patents and rely principally on trade secret, copyright and
trademark laws, nondisclosure and other contractual agreements to protect our
technology. We also believe that factors such as the technological and creative
skills of our personnel, product enhancements and new product developments are
essential to establishing and maintaining a technology leadership position. We
enter into confidentiality and/or license agreements with our employees,
distributors and customers, and limit access to and distribution of our
software, documentation and other proprietary information. Nevertheless, the
steps we have taken may fail to prevent misappropriation of our technology, and
the protections we have may not prevent our competitors from developing
products with functionality or features similar to our products. Furthermore,
third parties might independently develop competing technologies that are
substantially equivalent or superior to our technologies. In addition,
effective copyright and trade secret protection may be unavailable or limited
in certain foreign countries. If we fail to protect our proprietary technology,
our business could be seriously harmed.
Although we do not believe our products infringe the proprietary rights of
any third parties, third parties may nevertheless assert infringement claims
against us or our customers in the future. Furthermore, we may initiate claims
or litigation against third parties for infringement of our proprietary rights
or to establish the validity of our proprietary rights. Litigation, whether
resolved in our favor or not, would cause us to incur substantial costs and
divert our management resources from productive tasks, which could harm our
business. Parties making claims against us could secure substantial damages, as
well as injunctive or other equitable relief which could effectively block our
ability to license our products in the United States or abroad. Such a judgment
could seriously harm our business. If it appears necessary or desirable, we may
seek licenses to intellectual property if we believe that our technology
potentially infringes on such technology. We may not, however, be able to
obtain such licenses on commercially reasonable terms or at all, and the terms
of any offered licenses might not be acceptable to us. The failure to obtain
necessary licenses or other rights could seriously harm our business. As the
number of software products in our industry increases and the functionality of
those products further overlaps, we believe that software developers may become
increasingly subject to infringement claims. Any such claims, with or without
merit, would probably be time consuming and expensive to defend, and could
seriously harm our business. We are not aware of any currently pending claims
that our products, trademarks or other proprietary rights infringe upon the
proprietary rights of third parties.
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"TIBCO", "The Information Bus", "TIB" and the names of our products are our
trademarks or tradenames.
Employees
As of November 30, 1999, we employed 490 persons, including 120 in sales and
marketing, 149 in research and development, 63 in finance and administration
and 158 in client services and technical support. Of our 490 employees, 62 were
located in Europe, and 37 in Australia and Asia. We believe that our
relationship with our employees is good.
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FACTORS THAT MAY AFFECT OPERATING RESULTS
The following factors could materially and adversely affect our future
operating results and could cause actual events to differ materially from those
predicted in forward-looking statements related to its business.
We have a history of losses and we expect future losses, and if we do not
achieve and sustain profitability our business will suffer and our stock price
may decline
Although our revenue has increased in recent quarters, we may not be able to
sustain our growth or obtain sufficient revenue to achieve and sustain
profitability. We incurred net losses of approximately $4.7 million, $13.0
million, and $19.5 million in fiscal 1997, 1998 and 1999, respectively. As of
November 30, 1999, we had an accumulated deficit of approximately $37.1
million.
Since the beginning of fiscal 1998, we have invested significantly in
building our sales and marketing organization and in our technology research
and development. We expect to continue to spend substantial financial and other
resources on expanding our direct sales and marketing activities and developing
and introducing enhancements to our existing products and new software
products. As a result, we need to generate significant revenue to achieve and
maintain profitability. We expect that our sales and marketing expenses and our
research and development expenses will continue to increase in absolute dollars
and may increase as percentages of revenue for the foreseeable future.
Our future revenue is unpredictable, and we expect our quarterly operating
results to fluctuate, which may cause our stock price to decline
Period-to-period comparisons of our operating results may not be a good
indication of our future performance. Moreover, our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that event, our stock price would likely decline. As a result of our limited
operating history, our new business strategy and the evolving nature of the
markets in which we compete, we may have difficulty accurately forecasting our
revenue in any given period. In addition to the factors discussed elsewhere in
this section, a number of factors may cause our revenue to fall short of our
expectations or cause fluctuations in our operating results, including:
. the announcement or introduction of new or enhanced products or services
by our competitors;
. the amount and timing of operating costs and capital expenditures
relating to the expansion of our operations; and
. the capital and expense budgeting decisions of our customers.
In addition, our quarterly operating results have historically been subject
to variations throughout the year due to a general slow-down in our sales in
the summer months, particularly in Europe. Specifically, we generally
experience relatively lower revenue in our third fiscal quarter. These seasonal
variations in our operating results may lead to fluctuations in our results of
operations from quarter to quarter throughout the year.
Our dependence on a limited number of customers for a significant amount of
our sales could lead to fluctuations in our operating results
Our business depends on sales of our products to a limited number of
customers, which may cause fluctuations in our operating results. We do not
have long-term contracts with any of our customers. There can be no assurance
that any of our customers will continue to purchase our products in the future.
As a result, a customer that generates substantial revenue for us in one period
may not be a source of revenue in subsequent periods.
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Our licensing and distribution relationship with Reuters places limitations on
our ability to conduct our business
We have a significant relationship with Reuters for licensing and
distribution. Our relationship with Reuters involves limitations and
restrictions on our business, as well as other risks, described below.
Reuters has access to the intellectual property used in our products, and
could use the intellectual property to compete with us. We license the
underlying TIB messaging technology incorporated into some of our important
TIB/ActiveEnterprise products from Reuters. We do not own this technology.
Reuters is not restricted from using the TIB technology to produce products
that compete with our products, and it can grant limited licenses to the TIB
technology to others who may compete with us. In addition, we must license all
the intellectual property and products we create through December 2011 to
Reuters. This will place Reuters in a position to more easily develop products
that compete with our product offerings.
We must rely on Reuters and other distributors to sell our products in the
financial services market, and they may not be successful in doing so. Under
our agreements with Reuters, we are restricted from selling our products and
providing consulting services directly to companies in the financial services
market and major competitors of Reuters, and from using the TIB technology we
license from Reuters to develop products specifically for use by these
companies. Accordingly, we must rely on Reuters and other third-party resellers
and distributors to sell our products to these companies.
In fiscal 1998 and 1999, substantially all of our revenue from sales in the
financial services market, excluding sales to Cedel Global Services, consisted
of product fees paid to us by Reuters. Although Reuters is the preferred
distributor of our products in the financial services market and is required to
pay us guaranteed minimum product fee payments until the end of 2001, Reuters
has no contractual obligation to distribute our products to financial services
customers. Reuters and other distributors may not be successful in selling our
products into the financial services market, or they may elect to sell
competitive third-party products into that market, either of which may
adversely affect our revenue in that market.
Our relationship with Reuters restricts our ability to earn revenue from
sales in the financial services market. Under the license agreement, Reuters is
required to pay us product fees based on a percentage of its revenue from sales
of our products in the financial services market, excluding products that are
embedded in any Reuters' products. These product fees may be materially less
than the product fees we could obtain from other distributors or resellers in
the financial services market. In addition, when we sell our products into the
financial services market through third-party distributors other than Reuters,
Reuters receives a share of our license revenue.
Our license agreement with Reuters imposes practical restrictions on our
ability to acquire other companies. The license agreement places no specific
restrictions on our ability to acquire companies with all or part of their
business in the financial services market. However, under the terms of the
license agreement, we are prohibited from bundling or combining our products
that are based on licensed technology with an acquired company's products and
services and then selling the bundled or combined products directly to
financial services companies. This prohibition could prevent us from realizing
potential synergies with companies we acquire.
Our acquisition strategy could cause financial or operational problems
Our success depends on our ability to continually enhance and broaden our
product offerings in response to changing technologies, customer demands, and
competitive pressures. To this end, we may acquire new and complementary
businesses, products or technologies, and we may use some of the proceeds of
this offering to do so. We do not know if we will be able to complete any
acquisitions or that we will be able to successfully integrate any acquired
business, operate them profitably, or retain their key employees. For example,
we completed the acquisitions of substantially all of the assets of InConcert,
Inc. in November 1999. Integrating
12
InConcert or any other newly acquired business, product or technology could be
expensive and time-consuming, could disrupt our ongoing business, and could
distract our management. We may face competition for acquisition targets from
larger and more established companies with greater financial resources. In
addition, in order to finance any acquisitions, we might need to raise
additional funds through public or private financings. In that event, we could
be forced to obtain equity or debt financing on terms that are not favorable to
us and, in the case of equity financing, that results in dilution to our
stockholders. If we are unable to integrate InConcert or any other newly
acquired entity, product or technology effectively, our business, financial
condition and operating results would suffer. In addition, any amortization of
goodwill or other assets or other charges resulting from the costs of
acquisitions could harm our operating results.
The market for enterprise infrastructure software may not grow as quickly as
we anticipate, which would cause our revenues to fall below expectations
The market for enterprise infrastructure software is relatively new and
evolving. We earn a substantial portion of our revenue from sales of our
enterprise infrastructure software, including application integration software,
and related services. We expect to earn substantially all of our revenue in the
foreseeable future from sales of these products and services. Our future
financial performance will depend on continued growth in the number of
organizations demanding software and services for application integration, e-
business and information delivery, and seeking outside vendors to develop,
manage and maintain this software for their critical applications. Many of our
potential customers have made significant investments in internally developed
systems and would incur significant costs in switching to third-party products,
which may substantially inhibit the growth of the market for enterprise
infrastructure software. If this market fails to grow, or grows more slowly
than we expect, our sales will be adversely affected.
Our stock price may be volatile, which could cause investors to lose all or
part of their investments in our stock
The stock market in general, and the stock prices of technology companies
in particular, have recently experienced volatility which has often been
unrelated to the operating performance of any particular company or companies.
If market or industry-based fluctuations continue, our stock price could
decline regardless of our actual operating performance and investors could lose
all or part of their investments.
Item 2. Properties
Our principal administrative, sales, marketing and service development
facilities are located in an approximately 92,000 square feet building in Palo
Alto, California pursuant to a lease which expires in 2005. In addition, we
lease field support offices in 23 cities throughout the world. The field
offices range from small executive offices to a 7,800 square foot facility.
Lease terms range from month-to-month on certain executive offices to five
years on certain direct leases. Because our professional services are generally
performed at the client site, field facilities are generally small. Field
facilities are generally used for periodic meetings, training and
administration and by account managers. We have field facilities in Atlanta,
Georgia; Baltimore, Maryland; Brussels, Belgium; Cambridge, Massachusetts;
Chicago, Illinois, Dallas, Texas; Denver, Colorado; Detroit, Michigan;
Dusseldorf, Germany; Houston, Texas; London, England; Madrid, Spain; Melbourne,
Australia; Minneapolis, Minnesota; Munich, Germany; New York, New York; Paris,
France; Stockholm, Sweden, Sydney, Australia; Taipei, Taiwan; Toronto, Canada
and Woy Woy, Australia. We are continually evaluating the adequacy of existing
facilities and facilities in new cities and believes that suitable additional
space will be available in the future on commercially reasonable terms as
needed.
Item 3. Legal Proceedings
We are not party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1999.
13
PART II
Item 5. Market for Company's Common Stock and Related Stockholder Matters
The information required by this item is incorporated by reference to the
section entitled "Corporate Information" in the 1999 Annual Report attached as
Exhibit 13.1.
Item 6. Selected Financial Data
The information required by this item is incorporated by reference to the
section entitled "Selected Financial Data" in the 1999 Annual Report attached
as Exhibit 13.1.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item is incorporated by reference to the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the 1999 Annual Report attached as Exhibit 13.1.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is incorporated by reference to the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Quantitative and Qualitative Disclosures about
Market Risk" in the 1999 Annual Report attached as Exhibit 13.1.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated by reference to the
section entitled, "Financial Statements" in the 1999 Annual Report attached as
Exhibit 13.1.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
14
PART III
Item 10. Directors and Executive Officers of the Company
The information required by this item concerning the Company's directors and
executive officers is incorporated by reference to the information set forth in
the sections entitled "Election of Directors" and "Executive Officer
Compensation" in the Company's Proxy Statement for the 2000 Annual Meeting of
Stockholders to be filed with the Commission within 120 days after the end of
the Company's fiscal year ended November 30, 1999.
Item 11. Executive Compensation
The information required by this item regarding executive compensation is
incorporated by reference to the information set forth in the sections entitled
"Election of Directors--Director Compensation" and "Executive Officer
Compensation" in the Company's Proxy Statement for the 2000 Annual Meeting of
Stockholders to be filed with the Commission within 120 days after the end of
the Company's fiscal year ended November 30, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item regarding security ownership of
certain beneficial owners and management is incorporated by reference to the
information set forth in the section entitled "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement for the 2000
Annual Meeting of Stockholders to be filed with the Commission within 120 days
after the end of the Company's fiscal year ended November 30, 1999.
Item 13. Certain Relationships and Related Transactions
The information required by this item regarding certain relationships and
related transactions is incorporated by reference to the information set forth
in the section entitled "Certain Transactions" in the Company's Proxy Statement
for the 2000 Annual Meeting of Stockholders to be filed with the Commission
within 120 days after the end of the Company's fiscal year ended November 30,
1999.
15
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-k
(a) The following documents are filed as part of this Form 10-K:
1. Financial Statements. The following financial statements of the
Company and the Report of Independent Accountants thereon are incorporated
by reference to the portions of the Company's 1999 Annual Report filed as
Exhibit 13.1 to this Form 10-K:
Consolidated Balance Sheets at November 30, 1999 and 1998
Consolidated Statements of Operations for each of the two years in
the period ended November 30, 1999 and for eleven months ended
November 30, 1997
Consolidated Statement of Stockholders' Equity for each of the two
years in the period ended November 30, 1999 and for eleven months
ended November 30, 1997
Consolidated Statements of Cash Flows for each of the two years in
the period ended November 30, 1999 and for eleven months ended
November 30, 1997
Notes to Consolidated Financial Statements
Report of Independent Accountants
2. Exhibits: See Item 14(c) below.
(b) Reports on Form 8-K.
The registrant filed a current report on Form 8-K on November 1, 1999
to announce the registrant's acquisition of substantially all the assets of
InConcert, Inc.
The registrant filed a current report on Form 8-K/A on December 29,
1999 related to the registrant's acquisition of substantially all the
assets of InConert, Inc.
(c) Exhibits. The exhibits listed on the accompanying index to exhibits
immediately following the financial statement schedule are filed as part of, or
incorporated by reference into, this Form 10-K.
(d) Financial Statement Schedules. None
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, on this
24th day of February, 2000.
TIBCO Software Inc.
/s/ Paul G. Hansen
By: _________________________________
Paul G. Hansen
Executive Vice President,
Finance,
Chief Financial Officer,
Secretary
POWER OF ATTORNEY
KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Vivek Y. Ranadive and Paul G. Hansen and
each of them, jointly and severally, his attorneys-in-fact, each with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorneys-in-
fact or his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Vivek Y. Ranadive President, Chief Executive February 24, 2000
______________________________________ Officer and Chairman of
Vivek Y. Ranadive the Board (Principal
Executive Officer)
/s/ Paul G. Hansen Executive Vice President, February 24, 2000
______________________________________ Finance, Chief Financial
Paul G. Hansen Officer
/s/ Ginger M. Kelly Corporate Controller and February 24, 2000
______________________________________ Chief Accounting Officer
Ginger M. Kelly
/s/ Douglas M. Atkin Director February 24, 2000
______________________________________
Douglas M. Atkin
/s/ Yogen K. Dalal Director February 24, 2000
______________________________________
Yogen K. Dalal
Director February 24, 2000
______________________________________
Edward R. Kozel
Director February 24, 2000
______________________________________
Donald J. Listwin
/s/ Larry W. Sonsini Director February 24, 2000
______________________________________
Larry W. Sonsini
17
Director February 24, 2000
______________________________________
John G. Taysom
Director February 24, 2000
______________________________________
Philip K. Wood
/s/ Phillip White Director February 24, 2000
______________________________________
Phillip E. White
18
EXHIBIT INDEX
Exhibit
No. Exhibits
------- --------
3.1* Certificate of Incorporation of Registrant.
3.2* Bylaws of Registrant.
4.1* Form of Registrant's Common Stock certificate.
10.1* Form of Indemnification Agreement.
10.2* First Amended and Restated License, Maintenance and Distribution
Agreement dated May 28, 1999, among Reuters Limited, TIBCO Finance
Technology, Inc and Registrant
10.3* Draft Form of Third Amended and Restated Stockholders Agreement, among
Reuters Nederland B.V., Reuters Limited, Cisco Systems, Inc., Mayfield
IX, Mayfield Associated Fund III, Vivek Ranadive and Registrant.
10.4* 1996 Stock Plan.
10.5* 1998 Director Option Plan.
10.6* Form of Assignment and Assumption of Lease Agreement, between TIBCO
Finance Technology, Inc and Registrant.
10.7* Form of Employment Agreement between Registrant and Vivek Y. Ranadive.
10.8* Form of Employment Agreement between Registrant and Robert B.
Stefanski.
10.9* Form of Employment Agreement between Registrant and Paul G. Hansen.
10.10* Form of Employment Agreement between Registrant and Richard M. Taven.
10.11* Form of Master Services Agreement among Registrant, TIBCO Finance
Technology, Inc. and Reuters.
10.12* Software Development and License Agreement dated May 11, 1999 between
Cedel Global Services, societe ananyme and Registrant.
10.13* Industrial Lease Agreement dated December 14, 1995 between Porter
Drive Associated LLC and TIBCO Finance Technology, Inc (formerly known
as Teknekron Software Systems (Delaware), Inc.).
13.1 Portions of the Annual Report to Stockholders for the fiscal year
ended November 30, 1999, expressly incorporated by reference herein.
21.1 List of subsidiaries
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24.1 Power of Attorney (see page 17).
27.1 Financial Data Schedule.
- --------
* These exhibits are incorporated by reference to exhibits similarly numbered
in the Registrant's Registration Statement File No. 333-78195.
19