Teradata Corp (TDC) 2009 Q1 法說會逐字稿

Good morning, ladies and gentlemen and, welcome to the Teradata Q1 2009 earnings call.

(Operator Instructions) Please note, this conference is being recorded.

I will turn the call over to Mr.

Gregg Swearingen.

Mr.

Swearingen, you may begin.

Good morning.

Thanks for joining us for our 2009 first quarter earnings conference call.

Mike Koehler, Teradata's CEO, will lead our discussion highlighting Teradata's first quarter results.

After Mike's remarks, Steve Scheppmann, Teradata's Chief Financial Officer, will provide more details relating to our Q1 performance.

Darryl McDonald, Teradata's Chief Marketing Officer, who is also responsible for strategy and business development, is in the room as well.

Our discussion today include forecasts and other information that are considered forward-looking statements.

While these statements reflect our current outlook, they are subject to a number of risks and uncertainties that could cause actual results to differ materially.

These risk factors are described in Teradata's 10K and other filings with the SEC.

On today's call we will also be discussing certain non-GAAP financial information, such as free cash flow and revenue comparisons in constant currency.

A reconciliation of our non-GAAP results to our reported GAAP results and other information concerning these measures is included in our earnings release and on the investor page of Teradata's website which can be found at www.teradata.com.

A replay of this conference call will also be available later today on our website.

Teradata assumes no obligation to update or revise the information included in this conference call whether as a result of new information or future results.

I'll now turn the call over to Mike.

Thanks, Gregg, and good morning, everyone.

Teradata got off to a good start in 2009 with constant currency revenues up 5% and earnings per share growth of 13% in the first quarter.

Operationally, we executed well.

Both gross margins and operating margins improved meaningfully over the prior year.

SG&A expense was down 5% and overall expenses were down while absorbing key ongoing investments we are making to build for our future, R&D, adding new sales territories and strategic partnerships.

Looking at our performance by region on a constant currency basis, EMEA grew 12% over a prior year, APJ grew 9% and the Americas was up 1% over prior year which was a solid performance given that the Americas was coming off a strong Q4 where revenues grew 14%.

Overall, we saw good user base activity in the first quarter.

Customers continue to value and invest in Teradata to help operate their businesses more efficiently, reduce costs, find new sources of revenue, and enhance their customer relationships.

Upgrades included Delta, Continental, Air Canada, and QANTAS as the airline industry looks to improve fuel management, revenue yield management, and to personalize customer communication and marketing.

Retailers, such as [Carrefour], the world's second largest retailer, upgraded its Teradata environment to enable marketing activities for over 14 million households in France and to achieve a 360-degree realtime view of its customers across multiple customer contact channels.

J.D.

Williams in the UK, who is now doing customer analytics across all channels, including the web, to market the customers in near realtime.

[Telco] activity included China Mobile, Photophone Australia and (inaudible), the UK's leading Telco, and Bouygues Telecom in France which is reducing costs while consolidating numerous data marts in to its Teradata active enterprise data warehouse.

Upgrades at financial services institutions included Unit Credit Group in Italy, (inaudible) in Spain, and [Wayshung] Bank in China which is integrating customer financial data and operations data in addition to providing timely and accurate reporting for compliance.

Also, the US Government centers for Medicare and Medicaid services expanded its data warehouse in Q1.

Some new accounts wins we can name included The Limited stores, which is one of our 25/50 appliance new account wins in the quarter, Bank Accord in France, which was won with our partners [Ses] and Inframatica and included extensive benchmarks against numerous competitors, and the state of Maryland which chose Teradata in partnership with Accenture to recover unpaid tax revenue.

Our tax solution has already helped five states in the US collect over $1 billion in additional revenues.

While Q1 was a good start for 2009, we still have work to do.

We have set our sights on reducing SG&A expense and aggressively managing all of our costs to deliver the best results possible during this difficult economic environment.

But, in parallel, we are investing and working to expand our market position, technology leadership and strategic partnerships to position us to be stronger longer term.

First, we are adding more sales territories to extend our market reach.

We added 40 sales territories in 2008 and we will end 2009 with 60, which puts us on plan to add 90 new territories by the end of 2010.

As previously communicated when we announced this initiative last year, we do not expect meaningful revenues from these new sales territories until 2010.

Second, we continue to enhance and expand our purpose-built platform family.

The technology investments we make here are core to our business and allowed Teradata business to increase our data warehouse leadership position as well as extend our market reach by offering data warehouse with multiple uses, functionality, and price points.

The adoption rate of our 25-50 and 15-50 data warehouse appliance continues to ramp with 15 systems being sold in the first quarter.

Our total funnel for the two appliances is also up significantly from Q4 as well.

Twelve 25-50 data warehouse appliances were sold in Q1 and experienced strong win rates as well, winning nine of ten decisions where we competed head to head with appliance competitors.

The opportunity we have is to increase the number of deals in which we are competing.

One new 25-50 customer win, [Railinc] has massive amounts of data generate and must be exchanged between railroad companies in order to help the North American rail system to work more effectively.

Railinc is the intermediary that provides these services and is creating an information portal to provide business intelligence for its members.

Teradata's 25-50 scalability allows railinc to implement applications with good initial ROI and then grow it as needed to accommodate future requirements.

Another new customer win retailer, whose name we cannot share, is a good example of how our platform strategy plays out.

Competing against another appliance vendor, we proposed both our 25-50 data warehouse appliance and our 55-50 active enterprise data warehouse platform.

Having both solutions allowed our team to focus on customer requirements both short-term and also longer term and then objectively educate the customer on the options.

In this case, the customer selected the 55-50 due to the additional functionality business benefits and the higher ROI provided in an enterprise data warehouse environment for both the initial project as well as the longer term opportunities and requirements versus the lower cost appliances from both Teradata and our competitor.

The opposite holds true as well.

There are cases where companies evaluated both an appliance and enterprise data warehouse solution and the ROI made sense to implement the 25-50 appliance.

And, third, we have been pin vesting to increase and deep in our partnerships.

This in turn helps to increase the number of solutions for our customers and also helps expand our market reach.

These strategic partnerships require investments in R&D as well as the normal go-to-market and program investments.

We announced our strategic partnership with SES a year and a half ago and we are starting to see the benefits of integrating strengths of both companies.

We have developed joint horizontal offers for in data base processing, scoring accelerator and optimization services as well as financial industry offers for money laundering and credit risk.

These solutions are being used to help with customer churn, claims processing, product forecasting, risk and fraud detection.

Customers such as [O2], [Cabela's] and others are seeing where model deployments that used to take weeks can now be done in days and processing and scoring that took days can now be done in hours, driving new value faster while reducing cost.

We have a joint road map that we will continue to bring additional solutions to market for the years to come.

And last week, we announced an expanded strategic partnership with SAP whereby customers will be able to run SAP, NetWeave, or BW on Teradata.

This will provide a fully integrated SAP BW business objects and Teradata solution that will consolidate enterprise data and analytical needs in to a single enterprise data warehouse.

Today, SAP runs primarily on Oracle and IBM data bases.

Customers who have an SAP BW implementation and a Teradata enterprise data warehouse implementation in effect have two data warehouses.

These customers need to replicate and move data between SAP and Teradata.

Customer will now benefit by having one data warehouse instead of two and the associated cost reduction, speed and simplicity that comes with it as a result.

General availability is planned for Q1 2010 and we are excited about the opportunity it brings for customers, SAP and for Teradata.

We also have been investing and growing our professional services business as a fourth initiative.

Our PS revenue grew double digits the past several years leading to the economic downturn.

Our focus has now shifted to cost containment, but we are seeing some benefits from these past investments.

In Q1, professional services revenue were up 7% in constant currency and gross margins were up as well.

In addition to investing in tools and education, we opened four offshore consulting centers to augment our own shore consultants.

This has reduced our costs and blended rates to enable us to compete for more business as well as operate more efficiently overall and improve margins.

Our managed services business, for example, is leveraging offshore resources to provide new and more cost-effective offers to customers such as remote DBA and operation support.

Although small in size, it has been growing at a rate of 15% to 20% the past two years.

Professional services is strategic to growing our data warehouse business.

It helps increase our market coverage and presence with customers, helps stimulate demand and is also a key differentiator for Teradata versus our data warehouse competitors.

We will continue to prioritize our professional services focus on managing costs during this economic downturn but we believe we have positioned ourselves better to deal with the downturn and perform better longer-term as a result of these past investments.

Turning to our view for 2009, we are off to a good start.

However, the continued uncertain economic environment and the lack of visibility that we have for the second half of the year and in particular our product revenue makes giving guidance extremely difficult.

However, I would like to provide some context as to what we are seeing in Q2.

We have a very challenging quarter in terms of top line revenue versus prior year.

We are currently facing a 7% currency head wind and we are going against very strong prior year performances in EMEA and APJ.

EMEA had its largest quarter Q2 last year when it grew 33% and APJ had its third largest quarter ever in Q2 2008.

In the Americas, the total funnel is up and the overall activity is good but due to the current economic environment, the number of mature opportunities is still not where we need it to be.

SG&A expense will be down from Q2 prior year, but it will be up sequentially from Q1 due to the normal seasonality of the business.

The key major variable in the quarter will be our product revenue volume and its deal mix.

In summary, 2009 will be a challenging year in terms of the economy and we are rivetted on reducing costs and keeping SG&A flat to down versus 2008.

However, we feel very confident about the future for Teradata.

We will continue to invest prudently in R&D, sales coverage and partners and position the company for revenue growth longer term and increase share holder value.

With that, I'll turn the call over to Steve Scheppmann who will provide more details on Q1 and also the overall business.

Steve.

Thanks for joining us this morning and thank you for your continued interest in Teradata.

We are committed to actively working with our customers to rearchitect their information to allow them to aggressively pursue opportunities in the areas of cost reduction, risk management, asset management, and revenue generation.

We had another good quarter and we were encouraged by the resiliency of our business model given the tough macroeconomic conditions.

Our flexibility created by our strong capital structure and our free cash flow model allows us to pursue our four key strategic initiatives that Mike referred to earlier, even in this economy.

Now for a closer look at our financial results for the quarter.

Teradata's Q1 2009 revenue of $367 million was up 5% in constant currency from the first quarter of 2008 but down 2% as shown in US dollars.

By region, revenue in the Americas was down 2% as shown in US dollars, EMEA was down 6% while APJ was up 5%.

Our constant currency revenue increase was driven by good performance in the EMEA region and the APJ region where revenues were up 12% and 9% respectively.

From a revenue segmentation perspective, product revenue of $157 million was down 5% from first quarter of 2008.

In constant currency, product revenue was up 2% from the first quarter of 2008.

Services revenue in the quarter was basically unchanged from the $210 million generated in last year's first quarter.

In constant currency services revenue increased 7% from the first quarter 2008.

Maintenance revenue was $104 million which include software and hardware solutions.

This was a 1% increase from the first quarter of 2008.

Currency head wind had a meaningful negative impact on our year over year maintenance revenue comparison.

On the constant currency basis, maintenance revenue increased 6%.

Professional and installation-related services, which is the other component of our services business, is shown in US dollars relatively unchange from the prior year but increased 7% in constant currency.

We drove solid gross margin improvement in each region despite a challenging business environment.

Gross margin in the first quarter of 2009 was 54.5% compared to 51.7% in the first quarter 2008 due to good performance in both product and service margins which more than offset currency head wind on our margins.

Our product gross margin improved 200 basis points to 65.6% in the first quarter primarily due to fewer floor sweeps in Q1 2009 in the Americas and the higher-yielding product or hardware mix.

Services gross margin improved 380 basis points to 46.2%.

Driving our improvement in services margin was better utilization of internal services resources, lower third-party service costs, lower travel expenses and continued leveraging of offshore capables.

We generated margin improvement in both maintenance and professional services.

Moving to a geographical view, America's revenue of $205 million was shown as down 2% for the quarter but up 1% from Q1 2008 on a constant currency basis.

We continue to see solid pipeline of deal activity but closure rates continue to be difficult to predict as customers are proceeding through 2009 very cautiously and decisions are being protracted, as we have reference in previous quarters.

For the quarter, gross margin in the Americas region was up 280 basis points to 57.1% due to improved service margins for both professional services and maintenance services.

In EMEA, we reported a revenue decline of 6% to $97 million in the quarter but revenue was up 12% in constant currency.

Gross margin was 54.6%, a 410 basis point improvement from the 50.5% in the first quarter of 2008.

The increase in gross margin was driven equally by higher product and service margins.

In our Asia Pacific Japan region, we reported 5% revenue growth in the quarter.

In constant currency, revenue in APJ was up 9%.

Gross margin in APJ was 46.2%, 100 basis point improvement from 45.2% in Q1 2008.

This improvement was due to higher professional services margins.

Turning to expense structure, our Q1 2009 SG&A expenses was better by 5% driven by our continued focus on expense management and the benefit from a stronger dollar.

I want to highlight that we achieved this while executing our strategic initiatives to increase our market coverage through additional sales territories and partners.

Specific actions included salary-related cost, restricted hiring and travel and cost management initiatives that were specific to Q1 2009, including canceling non-customer related programs.

We continue to execute on our operational plan to increase our efficiency and drive more variability into our organizational expense structure, but from a trending perspective you should not expect the same level of improvement over the next three quarters.

Given the FX environment and our cost management actions, we continue to expect that our SG&A will be at or below our 2008 levels while absorbing our strategic initiative as it relates to sales territory expansion and partners.

As we discussed during our last quarterly conference call, R&D expenses in Q1 increased versus the prior year.

In Q1 2009 R&D was $30 million, $5 million higher than the prior year as we capitalized $5 million less in Q1 2009 than we did in Q1 2008.

This is all related to FAS 86 as we have discussed at length during the last several conference calls.

R&D expense will return to the levels that approaches but may not quite reach the 2007 level when R&D was $126 million.

As a reminder, R&D expenses in 2008 were primarily lower due to the timing of the capitalization of software development costs per the requirements of FAS 86 and a lower variable compensation expense.

The resulting impact in the quarter on Teradata's operating margin was 16.3%, a good improvement from 14.1% in Q1 2008.

As a reminder, Q1 is typically our smallest quarter of the year and yield the lowest margins due to seasonably lower revenues.

Below the operating income line, other income in the quarter was down $3 million from Q1 2008 due to lower interest income as a result of lower interest rate environment.

This is despite having $232 million more cash in short-term investments than a year ago.

For Q1 2009, our effective tax rate was approximately 25%, the same as in the first quarter of 2008.

For the full year, we continue to expect annual effective tax income rate for 2009 to approximate 26% to 27%.

Our tax rate reflects our intention to permanently reinvest foreign earnings outside the United States.

We can, however, repatriate the cash, if needed, but that would generate additional income tax expense in a corresponding current payable.

Stock-based compensation expense included in our Q1 2009 results was approximately $5 million or $3 million net of tax or approximately $0.02 per share, same as in Q1 last year.

We expect our full year 2009 stock-based compensation expense to be similar to the 2008 amount which was $20 million before tax.

During the first quarter we repurchased 1.3 million shares of our stock for approximately $20 million.

Since the initial share repurchase authorizations were approved a little over a year ago, we have repurchased 9.8 million shares of our stock or approximately 5% of our weighted average shares outstanding for approximately $196 million.

We announced earlier today our Board has approved an additional $300 million of share repurchase authorization.

As such, we have $365 million remaining on our Board open market authorizations for share repurchases.

As we have said before, we expect that the rate of our buyback will continue to fluctuate each quarter taking in account among other things our working capital needs, our stock price, alternative uses of cash, and economic and market conditions.

Turning to the cash flow statement.

In the first quarter we generated cash from operating activities of $165 million, up 15% from $143 million in the first quarter 2008.

After using $20 million for capital expenditures, the same as last year, we generated $145 million of free cash flow which favorably compares to $123 million of free cash flow in Q1 of 2008.

Teradata defines free cash flow as cash flow from operating activities, less capital expenditure for property and equipment and additions to capitalized software.

One of the real strengths of this business model is cash flow generation.

In Q1 we grew cash from operations 15% and free cash flow 18% on a 2% revenue decline.

Turning to the balance sheet, as of March 31, 2009, we had $571 million of cash in short-term investments, $129 million increase from $442 million at the end of 2008 even after using $20 million for share repurchases during the quarter.

With respect to our accounts receivable, days sales outstanding was 75 days as of March 31, 2009, compared to 93 days of December -- as of December 31, 2008, and 89 days as of March 31, 2008.

Deferred revenue at the end of the quarter was $321 million compared to $300 million at the end of Q1 2008.

As we did last quarter, in an effort to provide further transparency around currency movement and the potential impact on our revenue, we provided additional detail on our website regarding how currencies moved into 2008 and how this movement is expected to impact our year-over-year revenue comparisons in 2009.

Assuming the spot rates at April 28, 2009, we expect currency to create a 5% head wind for us for the full year 2009 and a 7 point head wind in Q2, same as we saw in Q1 2009.

As we said last quarter, roughly 40% of the current movement flows through our operating statement and affect our operating margin and income and our goal is to adjust or pricing models to the currency movements in the short-term in order to reduce flow through impact to approximately 30%.

To summarize, although we had good result in Q1, visibility continues to be limited not only for the full year but also for the second quarter.

Therefore, until we can gain better visibility on how our customers are reacting to the economic environment, it is difficult to provide specific revenue or EPS guidance.

Even our customers tell us they still do not have firm CapEx budgets for the year.

That said, we were pleased with our Q1 performance and that provides a solid start to the year, but we reiterate currency based on the current spot markets creating a head wind for us on both the top line and margins as we discussed earlier while creating a lesser positive impact on operating expenses.

Currency is expected to create the same head wind in Q2 as it created in Q1.

Given the current markets, R&D expense hitting the P&L is expected to be higher as we continue to invest in our core R&D.

In 2009, R&D expense is expected to revert back towards a normalized level.

In 2007, R&D expense was $126 million.

Expense management successfully offset the incremental selling expense related to the strategic decision we have made to increase the investment in our sales territories.

As demonstrated in Q1, SG&A is expected to be flat to down from 2008 even after absorbing the incremental sales territory costs.

By this time you probably heard every phrase from companies and from prognosticators to describe the current economic situation, so I won't pile on here.

But with your understanding of the economic environment, I remain encouraged that the present market conditions create and nurture an environment that will continue to drive companies to pursue better business intelligence from nontraditional sources.

This need for increased intelligence, including enhanced visibility and transparency across the enterprise, will create tremendous pressure on the existing transaction processing base data warehouse environments and the status quo of IT infrastructures will be perceived to be not good enough.

Generally, companies need a change agent, a crisis, or a burning platform to drive transformational change in the current economic climate, in some cases may be that change agent.

As a result, companies become more open and motivated to leverage analytics and Teradata is the most robust platform to integrate disparate sources of information into a cohesive platform to enable companies to extract the most value from their proprietary data and to aggressively compete, grow, and manage costs and risk in this market.

The points I would like for you to remember include that Teradata's well positioned in this market driven by its technology leadership position, its strong customer base and relationships, strong recurring revenue model from existing customer base and our annuity bases, strong capital position, $571 million of cash, no debt, and a strong free cash flow model, our new expanded product family and energy and our geographical business model.

But, most importantly, our team is passionately focused on driving value and competitive advantage for our customers in the most efficient manner and, with that, Operator, we are ready to take some questions.

Thank you.

(Operator Instructions) Our first question comes from Katy Huberty from Morgan Stanley.

Please go ahead.

Thanks.

Good morning.

So obviously a phenomenal March quarter after strong December so the question is whether you think you have stolen revenue in earnings from later this year or if these fundamentals are just a clear sign that data warehousing is facing different spending patterns than the rest of technology this year?

Katy, this is Mike Koehler.

We had the normal deferral and spillovers from Q4 to to Q1, Q1 to Q2 so I don't think there's anything indicative there as far as any movement of revenues, okay?

The challenge that we've got is the lack of visibility going forward.

Clearly, we have some pretty strong activity going in particular in Europe and other places of the world not as strong.

So at this juncture it's a little too early to tell and the visibility isn't there as far as getting a picture for what where this thing's headed.

Can you expand on some of the qualitative commentary around the pipeline of deals and maybe the number of conversations you're having with new customers today versus where you were at exiting the fourth quarter?

Understanding that some of those are 12-plus month lead times.

I would say activity is very similar to what we saw coming out of the fourth quarter so if you go back to what we said back in February, and what we were seeing in terms of activity around the world, it's very similar.

EMEA has strong activity, they have a good pipeline.

The challenge we have in EMEA like we had in the first quarter is about a 17% currency head wind and the thing that is a little bit different about Q2 -- well, actually it's significantly different in Q2 is EMEA had its biggest quarter ever last year in the second quarter and they grew revenues 33%.

That said, the EMEA activity in the pipeline is very good, new customers as well as everything across the board.

Asia Pacific Japan, once again, the activity in the pipeline is good outside of Japan and what we saw coming out of the fourth quarter was softness in Japan, outside of Japan the overall activity and pipeline remains strong.

The Americas coming out of the fourth quarter what we said was the number of mature opportunities in the pipeline was lagging.

It was down sequentially from the fourth quarter as you expect with the big fourth quarter that we had in the Americas and going into the second quarter once again the amount of mature deals in the Americas are still lagging where we need them to be.

That said, the overall metrics in the Americas, the new funnel activity, is up.

The amount of dollars in the funnel related to new accounts is up in the Americas' funnel, but the economic conditions continue to delay and push out the maturity of some of these deals and the closures.

Okay.

And then just lastly, I understand the run rate may change if the economy worsens from here but given what you know today, how quickly do you expect to put the additional $300 million of share buybacks to work?

This is Steve.

As we said before, we'll still be prudently active in the market.

I used all the qualifiers, working capital needs, other alternative uses.

So we will still be prudently active given the lack of visibility into 2009, I want to make sure we still maintain a balanced capital structure.

So this additional authorization gives us more flexibility and we'll operate with that flexibility on a prudent basis through 2009 and 2010.

Okay.

Thanks, guys.

Congrats on the quarter.

Thank you.

Thanks, Katy.

Our next question comes from Brian Denyeau from Oppenheimer.

Please go ahead.

Good morning, guys, how are you?

Good, Brian.

If we could drill into the services the margin for a second.

You did a good job of lying out what you have done there to improve the cost.

How sustainable is that and have you sort of reset the bar on what services margin can be going forward?

Brian, as I look at services margin, I mean, this is a very good indicator of the result of the lumpiness of the Teradata model.

We had a very good yield on revenue in Q1 and if you look at that yield compared to Q1 last year.

And, again, the Teradata model, depending upon the deal mix, depending upon the quality of the deals, can really generate some of the lumpiness in that margin yield.

At this point in time, that's how I would classify it.

It's something that we'll experience from time to time.

It's something that we're going to recognize being challenging in some other times, so I wouldn't read anything in to a trend on that PS margin at this point in time other than the mix of some of the deals coming through, but it is something that we are constantly focused on.

Okay.

Great.

That's helpful.

For a second on EMEA, very good growth there and certainly you guys are outperforming relative to your peers in that market.

Can you help me understand what's going on in terms of how you're getting not only demand generated but getting the deals actually done?

We're getting good growth in the emerging markets and we've been adding resources there as well.

We've had good results across all the geographies.

We're very strong in Telcos there which, in this environment, is a decent industry relative to some of the other ones and we also had very good success in financial services as companies look to get more visibility and granularity in to their information system.

It's been growth that's occuring on a geographic basis within Europe and growth that's been occuring across a couple industry segments, key industry, large industry segments in Europe.

It's benefited us very well.

And lastly, can you just talk about what you're seeing in the retail vertical so far this year and your expectations going through the rest of the year?

Thanks.

A good question.

The two industry segments that saw the biggest growth for us in the first quarter and once again a first quarter isn't a trend but you cobble it together with what we saw last year -- financial services was up quite a bit in the first quarter.

The other industry segment that was up was retail by quite a bit.

And, once again, that quarter doesn't make a trend.

However, retail, the largest geography for our retail business is in the US and in 2008 retail we saw some pretty significant declines in revenue.

Typically the retailers what we have seen over the past history and some downturns seem to get out ahead of this cost and savings in an advance of an economic downturn.

We got pretty hit hard in the retail in US so this year -- I am a little optimistic that on the retail side that we may bounce back a bit and we had a good first quarter in the retail industry.

Great.

Thanks, guys.

Our next question comes from the Nabil Elsheshai from Pacific Crest Securities.

Please go ahead.

Hey, guys, how are you?

Good.

So I guess to continue with the vertical stuff, any commentary on Telco in the quarter and what you're seeing going forward there?

Once again, in a quarter, I don't think it sets a trend, Nabil, but you asked a question.

The answer is financial services and retail were up quite a bit.

Communications overall globally was down, and manufacturing we had a pretty good dropoff in the first quarter.

Out of those four -- those are the four major industry segments for the Teradata business.

Of the four, I would say the one we see the most softness in overall around the world would be in the manufacturing industry segment outside of the high-tech sector those other manufacturing industry segments.

Okay.

And then could you give me the percent of revenue that came from the installed base?

Nabil, we are typically historically -- we said the 85% to 90%.

We didn't see anything outside in Q1 that would indicate that not to hold true.

Okay.

Because I think you gave 90% on the Q4 call.

Right.

On SAP relationship, could you give a little more detail on when that will be supported, what kind of -- if there's any joint go-to-market plans there and time frame that would take place?

Sure, Nabil.

This is Darryl McDonald.

With the announcement with SAP, we currently are working with customers to design the integrated solution that we are going to go to market with.

As you know, the announcement was primarily that SAP BW will now run on Teradata.

So we have a large number of joint customers today that have business warehouse and Teradata, so we are working with them now on plans to try to migrate and integrate those.

We are looking for -- the timeframe is early beta customers in Q4 of 2009 and then GCA in Q1 of 2010 so we are currently doing the port and working with customers on activities to try to get to that solution.

Okay.

And they are working with you to identify potential joint customers and go to market together?

Correct.

Yes.

SAP is working with us.

We are identifying joint customers together and the opportunity is that it's going to be a sale with model between Teradata and SAP, so we are both going to be working with customers hand-in-hand and will be selling their software or migrating their software on to the Teradata platform which will support the selling and the work around that.

It's also our intent to work with the major systems integrators to do this work as well, so we think there will be a great opportunity in us ramping up and training the systems integrators in the ability to help with these migrations as well.

Great.

Thank you.

Our next question comes from Anthony Kure from KeyBanc.

Please go ahead.

Good morning.

Just a, I question on the tone of conversations and if that has changed with your financial services customers.

We have heard from other folks saying there could be a 20 basis points special assessment from FDIC and that was impacting some of their capital decision making and just wondering if you have seen any conversations or heard any change in tone based on that dynamic?

This is Mike Koehler.

No, none that we are aware of, that I'm aware of.

Okay.

And then on the Oracle's acquisition of Sun, how do you feel that's impacted the marketplace both with those two companies or with Oracle specifically and then how Oracle's relationship with HP on their competitive product, wondering how that dynamic has played out as far as your conversation with customers in a competitive landscape?

Well, as far as the overall impact on the market, overall I won't comment on that.

As far as it relates to data warehousing and Teradata, at the end of the day, Oracle is a database that we compete with and they have added a hardware component to it to try to address a piece of their problem in conjunction with HP.

What they do with exit data as it relates to Sun, we don't know, but at the end of the day it's a database and there's a hardware component to it whether it's Sun or whether it's HP whereas on the other hand Teradata is all software.

Have you encountered the (inaudible) data solution anymore and pilots or customer sites any more than last quarter?

We haven't seen too much [exit] data to date.

There is one customer where we did get heavily engaged and there were benchmarks done.

We performed exceptionally well versus exit data, and that's about the extent of it so there's been maybe three or four accounts where we are engaged with exit data and only one to a detail, what I would call a detailed degree.

With that said, Oracle's got a huge market presence.

They've got a lot of relationships and everything else and we are very respectful of them as a competitor, but from a technology perspective, we feel very confident about Teradata.

Yes, this is Darryl.

I want to add one other comment to your point about the Sun Oracle.

I think to Mike's point, there's probably more impact to other OLTP competitors in the marketplace than there is to us because from our perspective we have been competing with Oracle and Sun for quite some time and we still feel very comfortable in our ability to compete and win against those two products in the marketplace.

Okay, great.

And last question -- just given the results of the first quarter -- I know you talked about visibility and you gave a little color on the second quarter, but I just wonder if there's any possible way you can maybe provide some sort of full-year parameters for EPS expectations?

Well, yes, Anthony.

As I've said, the current market conditions and the visibility in the second half, particularly as it relates our product revenue, makes extremely difficult to provide specific guidance around 2009 revenue and EPS.

And on top of the traditional Teradata lumpiness that we have all come to love and hate, it makes it difficult.

If I look at -- if I really look at our internal sites and I say, okay, focusing on flat revenue and constant currency with our sites on flat revenue and in constant currency and that's adjusting for 5% FX head wind, that would translate into an EPS of approximately $1.10 to $1.20, given those metrics.

With the visibility being tough, to give specific guidance at this time would be extremely difficult.

Okay, thank you.

I appreciate that.

Our next question comes from [Gray Kulter] from Great Lakes Review.

Please go ahead.

Good morning and congrats on a good quarter.

I wonder if you could comment on -- I know you made some commentary earlier about the DSOs, but wondering if you could comment on accounts receivable quality overall on aging and so forth?

Yes, the accounts receivable quality on aging, we continue to see improvement on the DSO.

Our accounts receivable base is the global 3,000 and one comment that I can make on there is that we have not seen anything significant increase in any of the write offs on it.

We believe we have taken an adequate reserve position at this point in time given the macroeconomic conditions, and we haven't seen any significant deterioration out of the unusual or out of the normal on that receivable base, but we have seen improvement in the DSO through March 31, 2009.

Okay.

Is your allowance still around $11 million?

It's still around the $10 million range where we are at 12/31/08.

I should say the reserve.

Yes.

What would you anticipate your capital spending to be all in for 2009?

Capital spending -- again, we traditionally have said $75 million to $85 million with including capitalized software, I would anticipate that to be very similar.

Okay.

And looking at the competitive environment, any significant changes there that you can comment on or would like to comment on?

Hi, this is Darryl McDonald.

Not really.

I think the competitors that we have been competing with remain the same.

I think we feel very confident now that we have our platform family that we have both the platforms and the price performance to compete at all levels from the entry level to the appliances to the enterprise warehouse so I would say at this point in time we are just in a great position to compete and nothing has really changed on that landscape for us.

Okay.

I missed early in the call, Mike, where I think you indicated how many new systems were sold.

Was that 12?

It was a total of 15.

There were 12 25-50s and three 50-50s in Q1.

Okay.

And one last one.

I noticed that the Company has had more releases in the past with Winn-Dixie and Juroku Bank and BBBA and Publix and so forth.

Are these new?

Are they expansions?

How should we, looking on the outside, gauge these announcements?

Yes, we typically denote in the press releases if it's a new customer or system expansion.

So what you're see in each quarter is a combination of both.

Typically around some of the big events like we just had Teradata Universe, there might be a larger number that gets produced as a part of that event but it coincides with the selling and getting alignment with the customer to do the press release.

Sometimes they are in the quarter, sometimes they lag a quarter.

It depends on their willingness to let us promote that.

Okay.

Thank you.

You have a follow up question from Nabil Elsheshai.

Please go ahead.

Just real quick.

On the sales of the 25-50s, can you comment a little bit on the type of customer in terms of installed base and how that broke down versus new customers and installed base customers?

In the first quarter, Nabil, three 25-50s went to new customers and nine went in to user base.

Okay.

Great.

Thank you.

Our next question comes from Doug Reid from Thomas Weisel Partners.

Please go ahead.

Thank thanks for taking my question.

Congratulations on the strong results.

Thank you.

Really, question is on the 25-50.

Hoping to understand how margins on that product compare to your other products in your mix and whether or not those margins held constant during the quarter?

The margins across the platform family are pretty consistent from high-end to low-end to 15-50 to 25-50.

Okay.

Great.

Actually my other question was just answered.

Thank you.

Okay, thank you.

I think that's it.

Well, we have time for one more question and --

Operator, any more questions left?

I'm showing we have no further questions.

Very good.

Hey, I want to thank everyone for joining us this morning.

We are pretty pleased about the first quarter.

We are very encouraged.

One quarter doesn't necessarily make a year.

We have a lot of work to do but, nevertheless, we are off to a good start in Q1 from which to build on for 2009 and, more importantly, to also keep investing in our future.

So thank you, everyone.

Thank you, ladies and gentlemen.

This concludes the Teradata Q1 2009 earnings call.

Thank you for participating.

You may all disconnect.