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Cloud Stocks: Teradata Trying to Reinvent Itself on the Cloud

Posted on Monday, Mar 15th 2021

According to a Market Research Future report, the global big data analytics market is estimated to grow at 29% CAGR to $132.9 billion by 2026. Teradata (NASDAQ: TDC) is an old player in the market that is trying to reinvent itself on the cloud. The company recently announced its fourth quarter results that shows declining revenues. The company may need to acquire relevant cloud players to turn around.

Teradata’s Offerings

California-based Teradata was founded in 1979 by Carroll Reed, David Hartke, Jack Shemer, Jerold Modes, Philip Neches, Walter Muir, and William Worth. The idea behind Teradata came out of research being conducted at California Institute of Technology (Caltech) for Citibank’s advanced technology group. Caltech worked with Citibank to design a database management system for parallel processing with multiple microprocessors, targeted at addressing decision support needs.

Within a few years, Teradata had released DBC/1012, its specialized database computer. In 1991, it was acquired by NCR for an estimated $250 million. As part of NCR’s group, Teradata continued to make several organic and inorganic growth moves. In 2007, NCR announced that Teradata would become an independent public company.

Today, Teradata delivers real-time, intelligent answers by leveraging relevant data, regardless of scale or volume of query. Known as Pervasive Data Intelligence, its solutions can analyze data on-premises, in the cloud, and anywhere in between. Its key products include Vantage – a cloud data analytics platform that unifies data lakes, data warehouses, analytics, and new data sources and types to deliver unlimited intelligence to businesses; Vantage Analyst – an easy-to-use tool for self-service data loading, discovery, machine learning, and advanced analytics; and Vantage CX – a customer experience solution that gives marketers and customer experience professionals the autonomy, visibility, and insights needed to stay aligned to changing customer demand.

Teradata’s Financials

Teradata earns revenues primarily through sales of its software and hardware solutions along with consulting services. Revenues for the fourth quarter fell 0.61% to $491 million, surpassing the market’s forecast by 2.41%. EPS was $0.38, significantly better than the Street’s estimate of $0.25 per share.

By segment, revenues from its Perpetual software license and hardware segment fell 16.7% to $25 million. Consulting services’ revenues dropped 27.2% to $83 million, primarily due to coronavirus-related impacts, especially on activities conducted on-site.

Teradata ended FY 2020 with revenues falling 3% to $1.84 billion. Adjusted EPS grew from $1.05 to $1.31.

Teradata expects to grow at a low-single-digit percentage for the first quarter and an EPS of $0.38-$0.40. It forecast an EPS of $1.50-$1.58 for the year. The market was looking for revenues of $440.3 million for the quarter with an EPS of $0.27 per share and revenues of $1.85 billion for the year with an EPS of $1.55 per share.

Teradata’s Product Growth

During the quarter, Teradata announced a new automated service called DataDNA. It uses Vantage to produce data lineage and usage analytics. It is able to provide transparency on an organization’s data assets and their utilization across the ecosystem. It allows customers to manage data redundancy, reduce cost, accelerate data integration, help in regulatory compliance, and increase the return on investment.

It also announced the availability of Teradata Vantage on both the Google Cloud Marketplace and Microsoft Azure. Customers that use Vantage on Google Cloud now have the ability to subscribe to Vantage with a private and directly negotiated agreement through the Google Cloud Marketplace. With the subscription, customers are able to retire their Google Cloud spend commitment, thus simplifying their procurement and billing processes. On Azure, customers now have the ability to subscribe to Vantage with a pre-existing agreement with Microsoft. With the subscription, customers have the ability to reduce all of their Teradata spend against their Azure commitment.

Terrdata’s Competition

Teradata faces stiff competition from big players within the industry. IBM is a sizable threat to Teradata through its Netezza brand. But the bigger direct competition comes from Snowflake, which has a significant presence in the cloud. Teradata, on the other hand, is still known in the industry for its on-premise solution. But Teradata is working hard to change that image. It believes that its product is significantly advanced in terms of workload management and data governance and some of the core, deep SQL engine capabilities.

Teradata has also been investing heavily in its cloud-based solutions. Earlier it was spending 30% of its R&D money on the cloud and 70% on on-premise. It has flipped it around and now spends over 70% of its R&D spending on the cloud. It is also changing its roadmap to open the Teradata environment. It will enable customers to utilize cloud services for things like ETL, BI, reporting outside of the Teradata environment, and storing data in object stores, whether in the cloud or on-premise, instead of Teradata’s proprietary database.

Its stock is currently trading at $43.17 with a market cap of $4.7 billion. It touched a 52-week high of $59.58 in February. It hit a 52-week low of $17.62 in March last year following the COVID-19 crisis.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.

Photo Credit: Colossus Cloud from Pixabay

This segment is a part in the series : Cloud Stocks


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