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Teradata's 2010 starts with a bang

'Things have never been better'

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Maybe NCR shouldn't have been so eager to spin out its Teradata data warehousing business.

In the first quarter sales and profits were up like a shot, and the company has been able to weather the economic meltdown on the revenue front, with only slight declines while still boosting profits. And now, 2010 is shaping up to be a pretty good rebound.

Teradata said this morning in a conference call with Wall Street analysts that its sales were up 17 per cent, to $429m, in the first quarter ended in March, with net income up 49 per cent to $67m. Business is going so well in the first quarter that Teradata is willing to raise its revenue guidance for the year by two points, saying that it now expects sales to be up by between eight and 10 per cent and is also raising its earnings per share guidance from by six cents a share to between $1.60 and $1.70.

And this is from a company that Mike Koehler, Teradata's president and chief executive officer, candidly admits cannot predict its product revenues more than two quarters out because of the nature of the data warehousing business. In this regard, Teradata is more like Cray and Silicon Graphics, which sell big and expensive parallel server clusters and never quite know how each quarter will come together.

But Teradata is a bit different in that a big portion of its product revenues is the Teradata parallel database, which is tuned for data warehousing and analytics, which has an update and support revenue stream, and which has lots of bells and whistles that customers will pay extra for. Services make up more than half of Teradata's quarterly revenue, and maintenance on systems makes up half of that services stream. That makes services fairly predictable. So when business is good and the economy is on the mend, as the first certainly is and maybe the second as well, Teradata is willing to make predictions.

In the quarter, Teradata's product sales rose by 27 per cent, to $200m, boosted by five points thanks to the conversion of overseas sales to US dollars. Consulting services revenues in Q1 were $117m, up 10 per cent, and maintenance services accounted for $112m in sales.

The Americas region is back on its feet as far as Teradata is concerned, with sales up 23 per cent to $252m in the first quarter. EMEA was more subdued, with sales up only nine per cent to $106m. The Asia/Pacific-Japan region mirrored that, with a nine per cent sales bump to $71m.

In the call, Koehler said that new account sales continued to grow in the first quarter, and that competitive win rates grew in 2008, through 2009, and into 2010, and are at their highest levels in the company's history. (Presumably he meant since NCR spun out Teradata two and a half years ago.)

"Right now, things have never been better," Koehler said when asked about the company's competitive position. As for the sales cycle, Koehler said that in the US, "we're just about back to normal," with the exception of some softness among telecommunications companies, who are among the biggest users of data warehouses. EMEA was stable during the downturn, and continues to be stable, with the biggest challenge being currency exchange rates with the dollar.

As for Oracle's dramatic relaunch last fall of its Exadata appliances for data warehousing and online transaction processing with Version 2 of the machines, based on Oracle database and clustering software and Sun servers and storage, Koehler didn't express much concern. "Oracle's biggest presence is in OLTP, and in the analytics side, it is really in data marts. We really haven't seen much of a change," he said.

Koehler added that software giant SAP and Teradata were on track to get SAP's Business Warehouse data warehousing software ported to the Teradata database and iron for fourth quarter deliveries. While Koehler did not say this, that could take a bite out of Oracle's database business.

Teradata has $712m in cash and short-term investments, and the wonder is why Hewlett-Packard, which is run by NCR's ex-boss, Mark Hurd, has not acquired Teradata. The time to do that was in the middle of the economic meltdown at the end of 2008, when Teradata's stock tanked along with the rest of the market, pushing below $12 a share. HP, however, was trying to beat IBM by acquiring EDS; and these days, Teradata's market capitalization is kissing $5bn as its stock is above $30 a share.

HP may not want to blow the $7bn to $8bn Teradata might fetch. But if HP doesn't, maybe Oracle, which shows no signs of having sated its hunger in the database market, might think about it. ®

The smart choice: opportunity from uncertainty

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