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Teradata records historic second quarter

Pent-up demand builds

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Data warehousing pioneer Teradata has posted yet another strong quarter, begging the question (once again) what NCR was thinking when it let go of the company.

Mike Koehler, Teradata president and chief executive officer, said in a conference call with Wall Street analysts Thursday morning the company booked the best second quarter in its history, with revenues up 12 per cent to $470m.

Despite increased costs from research and development and from expanding its sales force with 19 new territories (something the company did last October to better chase new business), Teradata was nonetheless able to boost net income by 19 per cent, to $74m.

Koehler said that Teradata's platform appliances - entry and midrange data warehousing products aimed at expanding the company's customer base down from the high-end where it started - had a strong quarter, with these appliances accounting for 10 per cent of revenue in Q2. Since the products were announced two years ago, Teradata has sold them to 125 customers.

Going forward, Koehler said the data warehousing appliances would comprise somewhere between five and 10 per cent of sales. Koehler said that specialized analytical add-ons for Teradata warehouses, customized for specific workloads in conjunction with ISV partners, are beginning to see some traction, too, but reminded everyone that high-end Enterprise Data Warehouse products will continue to drive the bulk of the company's revenues.

In Q2, Teradata pushed $223m in data warehousing hardware and software, up 21 per cent compared to the year-ago quarter. Consulting services had a more modest (but expected) gain of four per cent, to $132m. Maintenance services, the gravy for the meaty sales of hardware and software, accounted for $115m, rising six per cent. Total services sales, when you add it all up, came to $247m, increasing five per cent.

Steve Sheppmann, chief financial officer, said product gross profits were up (hitting 68.5 per cent) in the quarter, offsetting lower services gross margins (falling to 47 per cent).

On a geographical basis, the Americas did well, with sales up 23 percent to $281m. Koehler said that in the US, pent up demand for data warehousing projects that had been building since the economy went on the skids in 2008 had help bolster sales as companies moved ahead with projects.

Koehler also said that Teradata's win rates in new accounts that have never had data warehousing before is higher than usual, although he would not say how much higher and dodged several questions on the call about who Teradata was winning against in these deals.

Product revenues in the Americas region was up 42 per cent, more or less matching the growth Teradata saw in the first quarter of this year. The EMEA region was not much fun this time around, with sales down eight per cent, to $108m. Product sales slumped, in part due to the sluggish economy, while currency accounted for five points of that decline. The Asia/Pacific and Japan region had a nine per cent bump in sales, to $81m, but was only up three per cent at constant currency.

Despite headwinds of higher R&D expenses in the second half of the year, higher compensation costs and expenses relating to the expanded 19 sales territories, and higher training, education, and customer event costs, Sheppmann said that for the full year, Teradata expects to hit the high-end of its earnings per share range of $1.60 to $1.70. Teradata had earnings per share of $1.46 in 2009.

And the company now says it is on track to hit the high-end of its revenue range, with somewhere between an 8 and 10 per cent bump compared to 2009, which works out to somewhere between $1.85bn and $1.88bn.

Contributing to these numbers in a helpful way will be those 19 new sales territories, which are expected to generate $100m in 2010 and another $150m in 2011. ®

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