Business

Teradata is making significant investments this year as it shifts its business strategy to focus on its customers’ increased demand for hybrid cloud data management and subscriptions for its services, according to company executives. The analytics solutions and data management company was “pleased” with the results that it reported Feb. 9 for the fourth quarter (ended Dec. 31) taking into account the impact from customers “increasingly opting” for its subscription-based purchase options, CFO Stephen Scheppmann said on an earnings call.

The company swung to a $58 million profit (44 cents a share) from a loss of $49 million (37 cents a share) in the same quarter a year earlier. Revenue, however, fell 13% to $626 million – a result weaker than the consensus forecast of analysts.

But Scheppmann pointed out that Teradata’s shift from perpetual payments to more subscriptions is impacting the amount of revenue that the company records up front. In the quarter, Teradata had about $40 million of subscription-based revenue that was not included in the reported results and will instead be recognized over time, over the course of the subscription contracts, he said.

The company is still in the “early stages of our transition” to subscription revenue and, in Q4, that shift was mainly led by the U.S, he said. But “we’re not pushing either one” of the business models on customers, he told analysts during the Q&A, noting that it’s up to clients to decide which option is best for their specific business needs.

In meetings, CEO Victor Lund found that Teradata customers were “receptive of our new strategy,” he said. But, from a business perspective, “we don’t care” whether customers wanted to buy Teradata services on a perpetual or subscription basis, he told analysts. Teradata will provide analysts with metrics during the year that will allow them to determine if its strategy is indeed succeeding, he added.

Lund conceded that Teradata has “a lot of work to do this year.” He added: “We have plans to do it. We are going to get it done. I feel great about where we are. But we have some heavy wood to chop here. And that’s why you’re going to see $100 million in investment” by the company,

Teradata expects that its analytical business consulting and analytical architectural consulting businesses, meanwhile, will grow about 20% in 2017, Scheppmann told analysts. “Although this is not a large amount of revenue currently, these are the activities that should drive future consumption” of Teradata services, he said.

Teradata has “a great opportunity ahead of us and we are making real progress here,” chief product officer Oliver Ratzesberger said. The company, he pointed out, now offers multiple deployment options, including on premises, in the cloud or through a hybrid cloud combination and with subscription-based purchasing options. He added: “We are seeing strong demand for this approach in our various cloud offerings.”

In the fourth quarter, Teradata “expanded the reach of our hybrid cloud technology, investing in a cloud data center in Germany to meet European customers’ demands for a secure, regional, agile environment,” Ratzesberger also said. Since then, he noted, the company launched Teradata Database for Microsoft Azure. In announcing that launch in January, Teradata said its goal was to offer clients more cloud-based options. (https://www.mesaonline.org/2017/01/12/teradata-announces-teradata-database-on-microsoft-azure-dcrm/)

Teradata is “seeing very strong interest in our cloud deployment options,” Ratzesberger said, adding most customers are looking for a hybrid solution now.

Dayton, Ohio-based Teradata is also opening a new research and development facility in Seattle and expanding its office in Santa Clara, California, he said. Shares in the company were up 9.74% at $33.11 in late morning trading Feb. 9.