Teradata Earnings Call Insights: Consulting Revenue vs Products and Services Growth
Consulting Revenue vs Products
Wamsi Mohan – Bank of America Merrill Lynch: Mike can you address the relative increase in consulting revenue here versus products, we had seen a similar trend back in the ’08, ’09 downturn with customers trying to optimize capacity. Just trying to see if you can draw any similar trends to that at this point?
Michael F. Koehler – President and CEO: One clarification, we do have our eCircle revenue a lot of that is going into the services revenue. So, when we look at the consulting services growth year-on-year, it’s actually lower than that. That said, we are growing our consulting services and services revenue at a pretty decent rate, net-net of that.
Wamsi Mohan – Bank of America Merrill Lynch: So are you seeing anything in terms of customers trying to optimize capacity?
Michael F. Koehler – President and CEO: Yes. So, you are on a good point. In previous years, what we’ve seen is as customers look to sweat their data warehouse assets. In fact, it involves a lot of tuning and a lot of consulting work done together with us to fine tune the data warehouses to free up capacity to meet some additional demand. So, in another words, some of the service levels, response times for different users or different applications, you can tune the performance back a little, in return, you free up capacity and in turn, it actually delays expansions and add-ons and product purchases.
Wamsi Mohan – Bank of America Merrill Lynch: And that’s what you’re seeing now or not?
Michael F. Koehler – President and CEO: We’re seeing it to a degree, yes.
Katy Huberty – Morgan Stanley: Assuming that services growth remains in the range from the first quarter through the remainder of 2013 that would put product revenue growth roughly flat to get to the low end of your guidance. So just curious if that’s how you think it plays out, and if so, why are we seeing flat product growth given the expansion of your customer base in the product portfolio and the priorities around big data that you talked about?
Stephen Scheppmann – CFO: Well, Katy, it’s Steve. I’ll answer on the services side. As Mike indicated that services revenue number includes the acquisition that we made last year in May and so the first quarter of this one has for year-over-year has that growth in it, and when we did the acquisition we said it would be about 1% of growth for the second half of 2012. So roughly you can do the math on that for the quarterly impact. We get a year-over-year comparables starting somewhat in Q2 and then the second half. So you would have to factor that out in order to that will drive some additional revenue growth on the product side.
Michael F. Koehler – President and CEO: And on the product side, Katy, for the full year we would have some product revenue growth. If you look at it more from a trending on the data warehouse product revenue, we started off in Q1 with a pretty good decline. And if you trend this thing out, what is in our guidance is that we’ll be growing product revenue and data warehouse revenue over double digits the second half of the year.
Katy Huberty – Morgan Stanley: Okay. And then just to clarify, the weakness in product revenue growth in the first quarter and the first half, is that a fewer number of customers that are buying or is this mostly deal sizes that are smaller but the same number of customers are making purchases?
Michael F. Koehler – President and CEO: It’s a little bit of both, so we do have customers that are delaying purchases, so they get moved out. They are delaying expansions to their data warehouses. But clearly the size of the purchases are much smaller. So in the first quarter the revenue from data warehouse transactions that were more than $5 million were down $69 million. I mean this was significant. So that is what happened in the first quarter, so it’s the number of transactions as well as the size of the transactions. Now on a more positive note, and most of these comments I’m making are regarding the Americas, on a more positive note I’m very, very encouraged what we’re seeing in the Americas versus what we were seeing 90 days ago. So the number of data warehouse opportunities and the size of the data warehouse opportunities have increased very significantly from Q1 to Q2. The variable in the Americas is in this environment we can’t put our hands on exactly what will close in the second quarter versus the third quarter. But when you look at the trend of what’s going on in aggregate, it is a good trend that we see when you look at Q2 and Q3 collectively in the Americas; that’s for data warehouse product revenue.
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