Netezza's TwinFin fuels profit surge

Data warehousing company Netezza posted a banner second quarter courtesy of its TwinFin product line.
Written by Larry Dignan, Contributor

Data warehousing company Netezza posted a banner second quarter courtesy of its TwinFin product line.

The company reported second quarter earnings of $3.2 million, or 5 cents a share, on revenue of $64.8 million, up 45 percent from a year ago. Non-GAAP earnings were 9 cents a share. Wall Street was expecting earnings of 6 cents a share on revenue of $52.7 million.

Indeed, Netezza's quarter was impressive enough to send shares soaring 27 percent on Friday. In a nutshell, Netezza's current customers are buying up its TwinFin line and the company landed one transaction worth $14 million. In addition, Netezza raised its fiscal 2011 revenue growth target to 30 percent.

Among the key points from Netezza's earnings conference call:

  • The company added 28 new customers and is gaining traction in digital media, financial services, telecom and retail.
  • Netezza is hiring and went from 447 employees to 469 workers in the quarter. The company also launched a development office in Cambridge, Mass. and started operating in China.
  • Oracle, Teradata and IBM are the primary rivals in the field.

The most interesting comments on Netezza's conference call were about the competitive landscape and competition with Oracle's Exadata machines in the analytics market.

Netezza CEO Jim Baum said:

Competitively we continue to see mainly Oracle, Teradata and IBM in our opportunities. Our win rates in Q2 were typical of what we have historically seen -- of what we have seen historically, very high against our primary competitors and nearly 100% against the other entrants. We believe that this is due to our value proposition resonating well, the highest price performance available, appliance simplicity reducing total cost of ownership, and very fast time to value. This, coupled with our proven sales teams and business methodology, positions us very strongly against our competition.

We saw Exadata in approximately the same percentage of deals in Q2 as last quarter, and our win rate continues to be at our historically high rates against it. In general, we see Oracle positioning Exadata in OLTP opportunities where there is a need to consolidate multiple servers and not focusing their efforts on the data warehouse.

We also find that when we perform POCs against Exadata the performance and simplicity characteristics of our appliances far exceed theirs. These characteristics enable significant wins against them in financial services and retail during the quarter. Teradata continues to aggressively compete and usually fields the 2580 and is now positioning the 2650 products against Netezza in their initial client engagements. Our win rate in Q2 against Teradata was at its historically high level as we continued to demonstrate higher performance, lower total cost of ownership, lower administrative overhead, faster time to value, and overall simplicity of our products and business practices.

Also, as you all know, EMC acquired Greenplum recently, and at this point we see no competitive differences in the market. We do expect EMC to aggressively position the Greenplum solution, and we believe we are very well positioned technologically to continue to compete effectively against them. Our historical win rates against Greenplum have been near 100%, although we encounter them infrequently. We do not currently believe that the combination with EMC will have a significant impact on their technological competitiveness, although we do expect to encounter them more frequently given EMCs enterprise market coverage.

Baum was frequently asked about Exadata and noted that Netezza won "some very significant transactions" against Oracle. On EMC, Baum added that it would take time for the storage giant to get the sales pitch down for Greenplum.


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