Takeover speculation can be a mixed blessing. Sure, it's great to see the price of a stock you own soaring on the idea that another company is about to make a bid (or better yet, start a bidding war). Unfortunately, this kind of speculation can set unrealistic expectations and blind investors to the potential of the company on its own.

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Such may be the case for TIBCO (Nasdaq:TIBX). As one of the only small independent middleware companies still standing, there is widespread expectation that the company will get bought out before too much longer. But what if that doesn't happen? While TIBCO is a small company competing with giants like IBM (NYSE:IBM) and Oracle (Nasdaq:ORCL), investors shouldn't just assume that it's "game over" if the company fails to sell out. TIBCO just have reached a tipping point where it could continue to work as an independent company.

Solid Fiscal Second Quarter Results
TIBCO reported that sales in its fiscal second quarter climbed 25%, handily beating even the high end of the Wall Street analyst range. Growth was fueled in part by a 32% growth in license revenue, and by strong sales in business optimization. While service oriented architecture revenue growth was fine, business process management was notably softer (albeit still positive).

Margins were also pretty solid for the quarter. The company lost a little gross margin leverage, but not enough to be a concern. Further down the line, the company delivered 28% growth in adjusted GAAP operating income.

Interestingly, the company logged 25% growth in revenue with 21% growth in sales and marketing spending. The question of marketing leverage has been an issue with names like Red Hat (NYSE:RHT) and Salesforce.com (NYSE:CRM) recently, and even allowing for the different business model and product line-ups, it is encouraging that TIBCO is showing this sort of leverage.

Can TIBCO Broaden Its Base?
TIBCO's revenue annualizes to less than $1 billion, so it is clear that this is a rather small company in the field of enterprise software. That has led many analysts and investors to assume that the company will eventually struggle to compete with the likes of IBM, SAP (NYSE:SAP), and Microsoft (Nasdaq:MSFT) and that it is only a matter of time before the company takes a bid. Certainly an acquisition of the company would make a certain amount of sense; there are very few buyable alternatives to TIBCO and the company would fill a gap for a company like Hewlett-Packard (NYSE:HPQ).

But what if TIBCO just doesn't want to sell? The company is building up its offerings in event-based and real-time computing and that market is changing under the influence of cloud computing and mobile devices like smartphones and tablets. While this opportunity may not allow the company to go toe-to-toe indefinitely against IBM, it may at least buy some time and ensure that the company does not have to accept any sort of low-ball offer.

The Bottom Line
Buying into a stock already buoyed by takeover speculation is pretty much just a game for the momentum traders in the crowd. TIBCO is a fine company and even with some takeover premium already in the shares, it is not as expensive as some other software names with arguably less attractive business models. Value-oriented investors won't find a lot to like here, but if the stock should sell off on news or rumors that a deal is not likely in the near future, this could be a name for growth investors to seriously consider. (For more, see Trademarks Of A Takeover Target.)

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