After three years of strategic floundering, Teradata now understands that it has a leadership problem, and announces a CEO change. Victor Lund, who heads the audit committee on the board, takes the helm.
Speaking to investors, Lund noted in his opening remarks that he is too old to be the permanent CEO, denied that he is merely a caretaker, and said he plans to find a new CEO in 90 days.
Asked about strategic missteps, Lund pointed to the Aprimo purchase; a safe comment given previous announcements. Beyond that he said that Teradata must change its culture and move faster.
In other words, he has no idea what to do. But he’s gung-ho.
Teradata also reports a net loss of $46 million, and a 20% decline in product revenue. Product revenue drives consulting and maintenance revenue, and a decline that steep implies a failing business model. Consulting revenue was up 4%: maintenance revenue up 2%. Selling, general and administrative expenses, down 5%; research and development down by 10%.
CFO Steve Scheppmann announced a definitive agreement to sell the Marketing software business for $90 million, “below what we expected.” Teradata paid $525 million for Aprimo in 2011.
Steve, you’re supposed to buy low and sell high.
Demonstrating his keen insight into the data warehousing business, Scheppmann noted that buyers “are moving away from capex.” He noted that Q1 sales in the Americas were down because Teradata shuffled its sellers. (Asked about this in the previous investor call, Mike Keough denied that shuffling the sellers would impair sales.) Scheppmann also noted that some deals slipped to Q2, and expects some Q2 deals to slip into later quarters.
Lots of slippage going on.
Oliver Ratzesberger, president of Teradata Labs, painted a picture of Teradata everywhere: on-premises, in private cloud, and in public cloud. The fly in the ointment is that Teradata in AWS Marketplace is a single node version; Teradata without an MPP architecture is like a muscle car with a tiny engine. He noted that Teradata is accelerating plans to put an MPP version into the cloud, and now expects to do so by the end of this year, only five years after Oracle.
Ratzesberger also mentioned rebranding the Teradata architecture as IntelliFlex, and consulting-led solutions. He did not mention Aster. In fact, nobody mentioned Aster. Presumably, that old dog won’t hunt much longer.
Asked a slightly technical question, Ratzesberger rambled incoherently.
Lund, Scheppmann and Ratzesberger all spoke of the central role of consulting in leading Teradata out of the woods. If Teradata is serious about that, they’re going to have to go full open source, like Pivotal did last year. You can’t easily mix a strategic consulting business with a software business. Just ask IBM.
Thomas Dinsmore's Blog 
Good analysis Tom. I would expect some re-statement of financial results in the coming weeks and perhaps an SEC investigation. It will be up to short sellers as to what happens next, but nobody will be in this stock for the long term. A ripe opportunity for Private Equity or an acquisition at fire sale prices. Put a fork in it!
We’ll see. On the investor call, Lund disclosed that the Board acted last night.
I wonder how long it will take to see similar revenue trends from other vendors of proprietary data science solutions.
SAS has been flat for several years, but their subscription pricing model makes them less vulnerable than TDC, which built its revenue model on perpetual licensing.
They’re also privately held, so less pressure to make quarterly numbers.
Howdy Tom – painfully on the spot as usual. Definitely TDC is not out of the woods by any means, but some action is still action.
http://seekingalpha.com/news/3180145-teradata-plus-4_8-percent-q1-beat-solid-profit-guidance
Just on the Pivotal thing – did the move really help their consulting arm? Just really curious.
Thanks for reading!
Honestly, I did not hear anything on the investor call that led me to believe that the new management has a clue what to do. Lund pleaded exigent circumstances, pointing out that he’d only been on the job for nine hours. But when he introduced himself, he touted the fact that he’s been on the board since 2007. So you’d think he would have at least an idea of what to do, something more than “we have to roll up our sleeves and move faster.”
Seeking Alpha is way too impressed with the non-GAAP earnings. Non-GAAP earnings are BS.
Pivotal services revenue is up 48% in the first quarter. On top of that, Pivotal’s software projects (Greenplum, Hawq, MADLib) have attracted a slew of new contributors and code commits now that they are under the Apache umbrella.
It is very difficult to mix strategic consulting with a software business. Prospective customers assume that the consultants are biased towards the company brand of software. That’s fine if you need a Teradata database installed and configured, but customers seeking an industry solution expect platform neutrality.
I’m with you on the mixing, but hey some folks might disagree:
http://www.ey.com/GL/en/Services/Advisory/EY-SAS
Partnerships aren’t the same, because the SIs partner with everyone. Well, everyone except Teradata. 🙂
http://www.ey.com/GL/en/Services/Advisory/Advisory2015—Alliances
And, TDC talk about a consulting-led strategy makes SI partnerships less likely. Netezza lost all of its SI-driven business when IBM bought the company. That was a third of their volume.
TDC’s best move at this point is to open source Aster and donate it to Apache; spin off the consulting arm; and sell the data warehouse business to whoever will buy it. The TD database brand has enough strength that it doesn’t make sense to open source it.
Everyone partners with SAS. EY has partnered with them for years.
http://www.sas.com/en_us/partners/find-a-partner.html#alliance-partners
Recently I read a book (Compete Smarter, Not Harder…) mentioning the statistics about success rates of managing the risk of growth.
“Growth and expansion away from core business (what a company does today: the essence of its business) can take place across multiple potential avenues or steps by doing such things as:
Expanding into new products and/or services to existing customers
Entering new geographies with existing offerings
Addressing new customer segments
Expanding along the industry supply chain
Using new distribution channels
As you move ever further away from your current core business, you are less and less likely to succeed. Success rates are low even at a one-step adjacent move: 35%; once you’re at more than three, new venture success rates fall below 10 percent on average.”
Teradata fallen into the failing basket this time…
Excellent point. Teradata’s strategic problem, though, is that it put most of its chips on data warehousing, and that isn’t a growth market anymore. So the options available to the company were either to go private, like Informatica and TIBCO or find new products and markets. Investors would be a lot better off today if the company had gone private.
I acquired stock in early 2012. It’s been on a downward slope ever since. Sold some when it peaked at 54 give or take. Now its in the twenties. I’ve got a small family owned business for over 25 years, if i made similar decisions i would not be in business today. Good luck Teradata, seems like you’re following the footsteps of the US Mail. You’re gonna need it!