Shares of Teradata (TDC 3.21%) plunged on Tuesday, weighed down by a mixed earnings report with mushy guidance targets. The data-storage veteran's stock dropped as much as 17.6% lower in the morning session, recovering slightly to a 13% price drop near 3:15 p.m. EDT.
Teradata's Q2 by the numbers
Teradata's second-quarter report looked good from a very quick first glance at the headline numbers. Adjusted bottom-line earnings rose 33% year over year, while your average analyst expected them to stay flat. That has to be good news.
But the glossy veneer was paper-thin. Revenues fell by 6% to $436 million, falling far short of the consensus Street target at $447 million. Looking ahead, management expects solid profits but continued revenue cuts.
CEO Steve McMillan explained that the macroeconomic environment is holding Teradata back, while clients are taking longer to complete their testing processes and sign a firm deal. Furthermore, the decision-stretching issue is only growing worse.
As a result, the company started a cost-cutting program with roughly 10% of the payrolls targeted for layoffs. Uh-oh.
NYSE: TDC
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Teradata's tough-turnaround try
None of these issues are new, and Teradata's stock has plunged 54% lower over the last year. The artificial intelligence (AI) boom may look like fertile ground for growing a data-storage and management business, but that hasn't translated into a ton of Teradata wins.
It's not easy competing with the cloud-computing giants and fast-growing market darlings at the same time, but that's where Teradata finds itself nowadays. Yes, AI outfits need a ton of storage space to support their AI training and daily operations, preferably with advanced data-fetching features and strong security. But Teradata isn't the obvious go-to name in that market anymore.
Teradata could boost its earnings with a large cost-cutting program, but the root cause of its recent downtrend is found in weak sales. It's hard to go faster with a lighter push on the gas pedal. I wish Teradata the best of luck with this turnaround effort, but I'll gladly do it from the sidelines.
