Netezza pulls back into profit for Q1
Big swing to profits, big upgrade coming
Data warehousing and analytics appliance maker Netezza continued to grow revenues in the double digits in the first quarter of fiscal 2011 ended in April, with revenues up 28.2 per cent to $58.2m, and swung to a $2.7m profit compared to a nominal loss in the year ago quarter.
As El Reg previously reported , Netezza started to turn its business around in the fourth quarter of fiscal 2010 ended in January, growing revenues 6 per cent to $53.6m, but profits took a hit against a tough compare that included some tax bennies in the prior year. This time around, the revenues and the profits are there, and if Netezza is any indicator, things are back to normal. But then again, the data analytics market is a bit hotter than the IT market overall, particularly because companies are trying to figure out how to better use their own operational data to wrestle revenue growth and profits from their own financials.
In Q1 of fiscal 2011, Netezza said that appliance product revenues rose by 31 per cent, to $42.8m, while services sales were up a more modest 21.1 per cent, to $15.3m. One customer accounted for a whopping 30 per cent of total sales in the quarter.
James Baum, Netezza's president and chief executive officer, said in a conference call with Wall Street analysts that Netezza added 20 new customers for its TwinFin appliances, which marry IBM blade servers to Netezza FPGAs designed to chew on data stored in a customized PostgreSQL database. Baum added that Oracle was Netezza's main competition, and that the Exadata appliance was "very visible in the marketplace." Teradata machines also come up against Netezza gear a lot, too, he said. IBM is hot to trot with its Smart Analytics Systems, but is not yet much of a threat, apparently, although Netezza is seeing IBM invest huge amounts of money in marketing with its "Smarter Planet" campaign. As in the past, Netezza says that the money that IBM and Oracle are blowing on promoting their own data analytics products only helps Netezza, which doesn't have the big marketing budgets of Big Blue and Big O.
Baum reminded Wall Street that it is cooking up an extended version of the TwinFins, called the TwinFin(i), or i-Class, that allows analytics software providers to run their code  directly on the TwinFin appliances rather than on separate boxes. This means you don't have to extract and transform data to analyze it; you chew it right there where it is on the warehouse. Netezza has also opened up its software stack so Java, C++, Fortran, and Python applications can talk to the warehouse, as can SAS or R analytics tools; you could even throw on Hadoop and do MapReduce if that floats your boat.
Baum said that the TwinFin(i) functions will come out with the next release of the Netezza software stack, due in the summer, which also sports an upgrade that will deliver 200 to 300 per cent performance increases on Netezza appliances. He did not elaborate much how such a big performance increase was possible, but Baum did say the upgrade would be a chargeable feature, and hence would drive sales. The company is making changes to the way it does data compression and manages table structures to get the performance bump; it is not clear that the Netezza architecture allows for the inclusion of flash drives to boost performance.
Patrick Scannell, Netezza's chief financial officer, said that upgrades at existing customers represented 82 per cent of sales, which works out to $47.7m, while the rest of the revenue, or $10.5m, came from the 20 new customers added in fiscal Q1. (Netezza had 25 new customers in Q4 of fiscal 2010 and 79 for all of 2010.) Interestingly, Netezza's North American business was up 46 per cent in Q1, but sales were soft in Europe and Asia. The good news is that with a small European business, the crashing euro doesn't really affect Netezza. Scannell said that the company has 55 sales reps, who drove 86 percent of revenues, and would add another five reps to push sales and broaden its channel, too; the company has 447 employees, up from 409 a year ago. The relatively new TwinFin product accounted for 87 per cent of total revenues, with the Skimmer baby appliances contributing 2 per cent and the rest coming from specialized Retail Analytics appliances.
Baum said that NEC has kicked out the first couple of versions of the Netezza database and FPGAs running on NEC server iron, which is the result  of an alliance inked between Netezza and NEC back in February. Baum reiterated that Netezza doesn't see the NEC variants of the appliances, which will be called the InfoFrame DWH Appliance and which NEC will sell directly and globally, adding much to the coffers in fiscal 2011. But the company has high hopes beyond that.
Netezza ended the quarter with $157m in cash and has $54.6m in deferred revenues, and is standing by its prior guidance that it can grow sales for the full year by at least 20 per cent. ®