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What Makes Teradata One of America's Best Companies

Founded out of Caltech in 1979 by a team of researchers, Teradata  (NYSE: TDC  ) is best known for helping Wal-Mart analyze its business on a mass scale by deploying the world's first 1 terabyte "data warehouse" in 1992. Today, the company partners with top tier consulting firms such as Computer Sciences, IBM, and Wipro, among others, in order to serve a vast and growing base of information-starved clients.

A data warehouse is a lot like it sounds: Gather up bits of information from across a network of different sources into a digital storage facility for later analysis. Marketing data sits next to customer data, which sits next to finance data, and so on. Think of it as a personal Internet from which business intelligence and analytics tools draw insight.

Teradata generates revenue from a combination of software and services, with maintenance contracts accounting for slightly more than 50% of revenue in most quarters. Sales of data warehousing technology comprises a substantial portion of the haul, of course.

But as more companies become interested in analyzing patterns in their businesses, Teradata has also taken to selling more tools -- including the algorithmically astute Aster Data, which handles unstructured information such as documents. Teradata acquired Aster in 2011 after taking a partial stake earlier. Combining traditional data warehousing with advanced tools for analysis has kicked up growth in recent years.

The case for Teradata
Given its fairly lengthy history, you wouldn't necessarily think of Teradata as home to cutting-edge technology. And yet it is. Employees laud Teradata's friendly and helpful teammates, excellent work-life balance, and professional growth opportunities. Not bad for a 33-year-old tech company that hasn't enjoyed much independence since its early days, especially when you consider that the employee rolls have ballooned by 50% over the past five years.

And yet Teradata could do better. In an industry that offers rich benefits and sometimes even unlimited vacation time, the company pays 2% below market  on average, according to PayScale. What's more, those who rate the company highly tend to cite job security and management talent rather than compensation and benefits.

Teradata went public in 1987 -- a year after Fortune named its signature technology "Product of the Year" -- only to be acquired by NCR  (NYSE: NCR  ) in December 1991. The company would remain a division of NCR for the next 16 years, three of those under the leadership of current Oracle co-president Mark Hurd. Throughout, Teradata would compete with Silicon Valley rivals from the dingy confines of Dayton, Ohio.

NCR granted Teradata its independence 20 years after its IPO, in 2007, and customers have come knocking in increasing numbers since. Not only is Wal-Mart still a client, but 25 organizations including Apple, Dell, and Verizon now trust more than a petabyte -- equal to 1 million gigabytes -- of sensitive corporate data to Teradata systems.

More than 1,300 clients use the software in some form today. What's that mean practically? Under Koehler's leadership, Teradata has grown revenue 9% annually and profit per share by more than twice that over the past five years. Gross margin -- at 56.2% -- is as high it's been since the company returned to the public markets as an independent entity. Returns on capital have declined over the same period but remain strong at 19.8% over the trailing 12 months.

Shareholders have enjoyed the performance. Shares of Teradata have more than doubled since coming public, a period during which the S&P 500 fell about 2%. The stock has also dramatically outperformed those of its closest peers: IBM, Oracle, and SAP.

Corporate performance isn't the only area where Teradata stands out. More than any of its peers -- or, frankly, the vast majority of publicly traded entities -- the company takes its role as a steward seriously.

The company has implemented a variety of energy-saving techniques that have allowed it to dramatically reduce its energy and emissions intensity. Employees are granted four working days per year for giving back, and so far, more than 2,300 have participated. The 2011 "Teradata Cares" awards singled out workers who helped with wildfire relief in Texas and education for underprivileged children in India, among other things. Teradata added to these efforts with undisclosed financial gifts.

The Foolish bottom line
Teradata's combination of strong positioning, proven business performance, employee satisfaction, and enduring commitment to the wider world affirm Teradata as one of America's best businesses.

Click here to read about the rest of The 25 Best Companies in America.


Read/Post Comments (5) | Recommend This Article (33)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 27, 2013, at 3:47 PM, henjo wrote:

    You MUST be kidding. One month ago it was $69.00+, today it's $58.00+ The slide continues. WHY hold any longer???

  • Report this Comment On February 28, 2013, at 11:35 PM, jpparnell wrote:

    Tim, thank you for the excellent article. I've had TDC on my Watchlist for awhile now and it looks like a good time to start a new position.

  • Report this Comment On March 03, 2013, at 4:42 AM, GiantMonster wrote:

    I would prefer to see more of its business description, its business model, its industry's competitive landscape, how its customers choose Teradata and not the others, etc.

  • Report this Comment On March 03, 2013, at 8:40 PM, cbilbo wrote:

    Interesting that the commentary is so favorable from the employees when so many are leaving (or are about to) due to poor morale, antiquated and ineffective management techniques, and the cardinal sin of paying sales far less than they had been promised and even at that, a heck of a lot lower than just 2% below market average. Too bad really as the technology definitely shines, but the days of it selling itself are long gone and these talented souls aren't sticking around for more broken promises and "Glory Days" tributes while Oracle, IBM, EMC, and HP show them the money . . .

  • Report this Comment On April 05, 2013, at 4:10 PM, FoolinSD wrote:

    henjo, I don't think he's kidding. Let's play the hindsight game. If the award was given out back when TDC was 15 at the start of 2009 and dropped 10% or 31 again at the start of 2010 and dropped 10%. We are only 1 quarter into 2013 - which TDC started in the 60s. Now I've done my research and the only qualm I have with this article is beginning saddled up with Oracle, etc. As much as I hate to say, even Larry agrees when he boasts about aiming for TDC. Different league, different ethics but sadly the market pulled TD down with Oracle. Yes TD does have a product that competes in the "small" databases with Oracle and yes TDC is more expensive, but from the system admin's point of view, it just works. Less maintenance, less tuning *and* less down time.

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