Tech Ideas For Those Who Are Worried About High Valuations

Teradata (TDC)

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This company is going through the challenge of changing its business model. This likely accounts for the low 1.30 price/sales ratio. The company is, quite literally, about data, initially data warehousing and now, primarily data analytics. This sounds like a big snooze to those who don’t work with data in a serious way (other than to scream about social media companies monetizing one’s personal data). Actually, though, it’s an extremely intricate field with different kinds of data serving different kinds of needs. Once upon a time, companies need to find ways to store enterprise-wide data in ways that would be efficient notwithstanding different data types for different organizational functions. That problem was solved long ago. But now, we’re facing similar issues for analytic tools; the need for enterprise analysis solutions that can work across different functions. That’s where TDC lives through its Vantage offering. The challenge today is for TDC to migrate from a perpetual license model (the functional equivalent of what in ancient times amounted to one-time transactions in which software providers sold program discs) and consulting services to a subscription model with its stream of recurring revenue. TDC did not, as many readers undoubtedly know, invent this approach. But it is the way it has to go, even despite the lumps it takes as the pace of decline in perpetual license and consulting revenue at times outstrips gains in subscription. The company did, however, beat expectations in the latest quarter. The fact that the current CEO is new on the job, as of June 8, 2020, adds credibility tot he story — management change is one of the first things I look for in companies that talk about reinventing themselves (to address the “If you couldn’t do it before, why should I believe you can do it now?” question).

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Disclosure: Long XITK.

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