NCR Analyzes the Data, to Spin Off Teradata

By Allen, Mike

When it comes to analyzing corporate data, Teradata, a unit of NCR Corp., which has a large office in Rancho Bernardo, is one of the world’s largest players.

The firm, which will be spun off from NCR in the third quarter, saw its revenue grow to nearly $1.6 billion last year while competing against the likes of Oracle, IBM Corp. and Microsoft Corp.

Yet even in technology-savvy San Diego, Tera-data has a low profile, a fact that comes with being a subsidiary of Dayton, Ohio- based NCR, and selling to customers that are primarily large, billion-dollar businesses rather than consumers.

Its business is also tough to describe. The company deals in collecting, storing, integrating and analyzing data.

That includes transactional data, personnel data, inventory data, customer data, shipping data — you name it, and Teradata will help you find it and use it.

“We allow our customers to understand and predict their business holistically,” said Scott Gnau, Teradata’s chief research and development officer.

For example, in the airline industry, there’s transactional record data, such as reservations and ticket sales and their prices. Then there’s more analytic data such as a customer’s history of ticket purchases, where the customer lives, destinations, and what days and times they tend to fly.

Teradata can collect millions of pieces of data, arrange them in a single place and make them readily accessible so companies can research specific problems or issues that would improve operations or profit-ability, Gnau said.

In a case study provided on Teradata’s Web site, Continental Airlines said it used the company’s hardware and software to help it go from one of the nation’s worst air-lines to among the best in a 10-year span.

Continental said the companywide data warehouse installed by Teradata has changed the way it does business. “Using strategic and tactical decision-making analytics, Continental’s EDW helps the airline continually alter its models and analyze ways in which the business might be positively changed. Every day, employees study potential cost-cutting and revenue opportunities. Everything is questioned,” according to the case study.

Though Teradata’s systems can be used for any size business, most customers are global, multibillion-dollar companies from a variety of industries, including financial services, retail, entertainment (particularly gaming and media), telecommunications and travel.

The cost to create and maintain an enterprise data warehouse depends on the size and what a company wants to accomplish. The price tag can range from less than $200,000 to more than $1 million, according to a Teradata spokesman.

A sampling of customers includes AT&T Corp., Bank of America, Boeing Co., DaimlerChrysler&rvices, eBay Inc., Federated Stores, Ford Motor Co., GE Capital, Office Depot, PayPal, Quantas Airways, Sears Roebuck & Co., the U.S. Air Force and Japanese-based Yum Brands.

The business entails three components: database warehousing, which uses hard-ware and software; analytics applications that sit on top of all the data; and services such as designing, installing, implementing and consulting connected to using data warehouses.

“This is a blue chip company, and only the largest companies in the world are running it, and depending on it,” said Michael Chiapetta, the former vice president of Fair Isaac Inc.’s San Diego office, who recently left the firm.

Teradata is an example of a growing number of analytic software businesses operating in San Diego. They include ID Analytics Inc., BasePoint Analytics, and Mitek Systems Inc., all of which are locally based.

UC San Diego

A key reason for this expanding niche in the software industry here is the presence of UC San Diego and the Navy’s Space and Naval Warfare Systems Command, the Navy’s information technology arm, Chiapetta said.

The 1,000 employees working at Teradata’s building include software engineers and system architects, who earn salaries far above the region’s median. Although the company declined to provide any salary figures for competitive reasons, a 2005 study done by the AeA, the trade group representing the technology industry, found the average worker in all technology positions earned $75,500 annually.

The decision to spin off Teradata has been in the works for years, and made official by NCR’s board of directors in January. Gnau said Teradata has been operating as an independent entity for a while, and has very different businesses and customers than NCR, a manufacturer of automatic teller machines and super-market checkout scanners.

Its business is also growing at a faster clip than the parent company. Last year it had net income of $198 million on revenue of $1.56 billion. That compared to 2005 when it had net earnings of $206 million on revenue of $1.47 billion. Teradata revenue made up 26 percent of NCR’s total of about $6 billion last year.

The planned spinoff would provide one share of Teradata for each share of NCR stock. The new shares would be traded, like its parent, on the New York Stock Exchange under the ticker, TDC.

Donald Feinberg, an analyst with Gartner Inc., a Connecticut- based research firm, expects the newly spun off Teradata to benefit from the spinoff by gaining the power to more easily raise capital, enabling it to grow the business quickly.

Specific Products

“The separation gives both the companies the ability to raise funds and focus resources on their specific products,” Fein-berg said in a recent report. “This would allow Teradata to make acquisitions to build a complete data warehouse solution set to meet growing competition from HP, IBM, Microsoft and Oracle.”

According to the proxy statement, NCR will incur a one-time cost for the spinoff between $50 million and $65 million for the varied financial, legal, tax, accounting and advisory services related to the split.

Because it houses the company’s research and development activities and one of the company’s larger offices, the San Diego office had a chance to serve as its new corporate headquarters, but NCR’s board decided to keep that in Dayton where the parent’s administrative offices are located.

Teradata had its beginnings during the mid-1970s in a research lab at the California Institute of Technology and officially incorporated in 1979. It shipped a beta system to Wells Fargo Bank in 1983.

In 1991, it was acquired by NCR, then a subsidiary of AT&T. The telecom giant later spun off NCR to regain its public company status.

Within a few months, NCR is taking the same route with its subsidiary, giving Teradata managers full control over the business.

Copyright San Diego Business Journal Jun 25, 2007

(c) 2007 San Diego Business Journal. Provided by ProQuest Information and Learning. All rights Reserved.