Certain technology firms have dominated their markets for years, only to discover that changing consumer tastes and business trends have hurt their recent growth.
They hope their strong brands and reputations will help them overcome these challenges. Here is one such stock that we cover in our Wall Street Stock Forecaster newsletter.
TERADATA CORP. (New York symbol TDC; www.teradata.com) makes computers and software that capture and store large amounts of a business’s data, including its sales and inventory. It then analyzes this information and identifies buying habits and trends, which helps its clients make better decisions. Teradata was a wholly owned subsidiary of NCR Corp. (New York symbol NCR, also covered in our Wall Street Stock Forecaster newsletter) before it was spun off as an independent company on October 1, 2007.
In the three months ended June 30, 2013, the company’s earnings fell 4.5%, to $126 million from $132 million a year earlier.
Teradata spent $91 million on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share fell at a slower pace of 1.3%, to $0.76 from $0.77.
The lower earnings are partly because Teradata hired more salespeople. It also raised its research spending to 7.0% of revenue from 6.5% a year earlier.
Tech stocks: Businesses seeking to boost sales with data analysis could be plus for Teradata
Revenue rose 0.8%, to $670 million from $665 million. Revenue in the Americas region (60% of the total) gained 1.8%, mainly because the company closed several large contracts in the U.S. Due to the higher value of the U.S. dollar, revenue from its operations outside the United States (40%) fell 0.8%.
Teradata now expects its revenue for all of 2013 to be unchanged from 2012. If you disregard currency rates, revenue will probably rise 1% to 2%.
The company gets roughly half of its revenue from outside the U.S., and unfavourable foreign currency rates will probably hold back its sales this year.
Terdata aims to profit as more businesses seek to boost sales by analyzing their data. Many of these clients lack the computers and software to capture the necessary information, so they must turn to companies like Teradata.
In the latest edition of Wall Street Stock Forecaster, we look at Teradata’s chances winning new clients for its data analysis against larger competitors like IBM and Oracle. We also look at whether the company is likely to reverse its fall in earnings. We conclude with our clear buy-hold-sell advice on the stock.
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A number of tech stocks that had a powerful niche market (like Corel with its Word Perfect software) have subsequently declined; some disappear and others survive in reduced form. Do you have examples of tech stocks that did very well for you and then started to slide? Were you able to spot the problems early and get out without big losses? Have you owned a tech stock that appeared to be slipping but turned around and regained its strong market position?
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