Even though their performance was unspectacular, the results provide a glimmer of good news in a somewhat gloomy software market.
By Helena Schwenk
05 Mar 2009
SAS and Teradata – two BI heavyweights – recently announced earnings for 2008. Both saw modest growth for the full year, with each experiencing some weaknesses in certain sectors and country markets. As the last remaining large independent BI vendors in the market, SAS and Teradata are reliable bellwethers for the general health of the BI market. Even though their performance was unspectacular, the results provide a glimmer of good news in a somewhat gloomy software market.
A complementary and cosy relationship
Teradata and SAS provide a useful benchmark for the BI market as they share many similarities. Both are large autonomous companies that predominately target a blue-chip customer base with large, complex, high-end solutions. Teradata focuses on large-scale enterprise data warehousing whereas SAS focuses more broadly on BI, analytic applications and data integration. Both companies are widening their market reach by targeting more cost-conscious, mid-market customers. With so much in common it’s not surprising both companies have a close strategic partnership and have come under speculation that they might merge. However, they do differ radically in terms of ownership. SAS has remained steadfastly private while Teradata is now a publicly listed company after splitting from its parent company NCR in October 2007.
Geographical divergence brings stability
Total-year revenue figures for both companies were respectable given the current market turmoil. SAS recorded total revenues of $2.26 billion in 2008, up 5.1 per cent over 2007, whereas Teradata saw revenues rise 4 per cent to $1.76 billion, with an impressive 25 per cent increase in net income year-on-year. While these are respectable growth levels for both companies, they do mark a slowdown in growth – especially for SAS, which reported a 13 per cent rise in revenues in 2007 compared to Teradata’s 10 per cent growth rate.
Both companies’ broad geographical reach is helping them weather the economic storm. Teradata managed to grow revenues in the Americas by 13 per cent in 4Q following a slow start in 2008. However, it could not repeat that feat in EMEA where revenues declined 7 per cent to $114 million, up 2 per cent in constant currency. Building a strong presence in emerging markets provides some shelter from the downturn, especially when IT spending starts to slow down or dip in North America and Western Europe. For example, Teradata added over 40 new sales territories in areas such as Eastern Europe and parts of Asia to help broaden its market reach. SAS saw strong growth in areas not suffering as deeply from the economic slump, including Latin America, which saw revenues up 25 per cent, India, where revenues grew 20 per cent, and parts of Eastern Europe, which saw revenues increase around 15 per cent.
Results vary across industries
Financial services is a key vertical for both companies. It is SAS’s biggest industry vertical, accounting for 35–40 per cent of revenues (based on our estimates) and 29 per cent of revenues for Teradata. This leaves SAS potentially more exposed to credit-market issues and any subsequent slowdown or cuts in IT spending. Surprisingly, Teradata seems to have fared well in this sector, reporting double-digit growth in 2008 – making financial services its highest growth sector. However, given the continuing trouble within the banking sector we don’t expect this to be a sustainable position throughout 2009.
Other industry sector results were mixed. SAS saw revenues for analytics grow more than 20 per cent in healthcare and education, with double-digit growth for BI tools in government, retail and life sciences. Conversely, the retail industry in 2008 for Teradata was difficult, seeing double-digit declines for the year, with the entire decline in the US. The reverse was true for manufacturing – another industry badly impacted by the downturn – with Teradata seeing double-digit growth for the full year, although Japan’s manufacturing sector is experiencing weakness.
2009 will remain a challenging year
While challenging macroeconomic conditions will remain throughout 2009, both SAS and Teradata, as large, financially stable companies with loyal customer bases, are well positioned to withstand the tough operating environment. More importantly, both companies’ software, applications and infrastructure are essential tools for helping businesses beat the downturn – whether they are used to highlight cost-reduction opportunities, improve supply chains, optimise inventory levels or help businesses understand risk or rapidly changing customer preferences and spending. That’s something both companies need to continue to capitalise on in their sales and marketing efforts in 2009.
