Teradata earnings soar in 2nd quarter.

Teradata earnings soar in 2nd quarter

Teradata Corp., the Los Angeles-based database computer manufacturer, last week reported second-quarter earnings rose 39 percent, and its stock subsequently hit a high of $24.50, up from the $21 range a week earlier.

The stock was in the $17 range in November and had more than doubled from its 52-week low of $12 before settling back slightly.

"We still rate [Teradata stock] an `aggressive buy' at $23.50," commented James W. Reynolds, analyst at Wedbush Morgan Securities. Reynolds previously recommended "aggressive buy" when the over-the-counter stock was at $18. "We believe the company is in a major market in the computer business - database processing - and a major direction in the computer business for the 1990s."

Teradata, last year named the fastest-growing small public company by Inc. reported second-quarter earnings of $5.34 million, or 37 cents a share, on revenues of $54.6 million vs. a profit of $3.8 million, or 27 cents a share, on revenues of $34.5 million for the same period last year.

The company had a profit of $16.3 million on revenues of $137.4 million for the fiscal year ended June 30, 1989, compared with $13.5 million profits on revenues of $89.5 million for the previous year. Five years ago, it had a loss of $12.8 million on revenues of $2.8 million.

Teradata paid five years of research dues before experiencing growth, according to a company spokesman. Its first product was not released until 1985.

Analysts attribute Teradata's growth to its unique database (or lists) processing systems. These systems have the power to process trillions of characters, or terabytes, at one time, whereas a typical mainframe computer, can process only tens of billions of characters at once.

Such capacity allows a retailer to coordinate sales between stores, transferring slow-moving merchandise from one region to another where it might be in short supply. A bank using Teradata equipment can store years of data on customers for marketing use. K-Mart and Citibank have been customers of the company.

Teradata has no significant competitors. "[Teradata's] only significant competition is an IBM mainframe running DB2, [Teradata's own] relational data base software," wrote Reynolds of Wedbush Morgan.

Furthermore, IBM mainframe equipment is more expensive than Teradata's database systems, analysts said, and Teradata's customer base is very strong.

"Teradata offers more than a five-to-one price/performance advantage over IBM," reported Montgomery Securities, which also recommended "aggressive buy."

The company recently established subsidiaries in Canada, Australia and five European countries. Additional expansion is being planned for Japan, a significant market because it holds the second largest concentration of mainframes in the world, and Teradata's systems are attachable to mainframes.

Research reports estimate revenues for the year ending June 30 will be around $250 million, increasing to over $300 million for fiscal 1991.

"We've had several Wall Street analysts pick us up lately," noted Rick Van Hoesen of Teradata. "When John Dean at Solomon Bros. [recommended it Friday] the stock ran up to $24.25."