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Informatica Corporation (INFA): Is This A Cloud Play?

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Informatica Corporation (NASDAQ:INFA)Informatica Corporation (NASDAQ:INFA), the world’s leading data integration software vendor, recently announced its Q1 financial results. The company reported revenue of $214.3 million including software revenues of $88 million, up 9% year-over-year. On the earnings front, the company reported GAAP EPS of $0.16 and non-GAAP EPS of $0.31. Informatica Corporation (NASDAQ:INFA)’s chairman and CEO Sohaib Abbasi said:

Our first quarter 2013 results highlight the growing customer demand for our expansive portfolio of software and services. We continue to invest for sustained growth by further differentiating the Informatica product portfolio and maintaining our track record of continual innovation.

The Q1 financial performance of Informatica Corporation (NASDAQ:INFA) has been impressive and the stock has seen a decent rally after earnings. Before delving deeper into the long-term prospects of the company, let’s see what analysts had been modeling for the first quarter earnings. Analysts expected an average revenue of $202 million and an EPS of $0.31, which implies revenue beat analysts’ expectations but EPS was in line.

Long-term prospects

Informatica Corporation (NASDAQ:INFA)’s recent initiatives in cloud computing and big data analytics have been significant. The company is on a long-term growth path, and the stock deserves a “buy” rating at the current price. Let’s see why:

1. Informatica announced Cloud Spring 2013

The company announced a fresh cloud offering in the first quarter that includes an enhanced version of cloud data masking and workflow, apart from advanced security features.

Informatica Corporation (NASDAQ:INFA) announced its partnership with NetSuite Inc (NYSE:N) and Workday Inc (NYSE:WDAY) for bringing additional cloud capabilities. The company released a new cloud product that synchronizes data between NetSuite ERP and Workday Human Capital Management. According to Arik Hesseldahl of All Things D:

Software integration company Informatica says it has merged two major cloud-based business software platforms, NetSuite and Workday, into a combined, prepackaged product. NetSuite is the cloud-based enterprise resource management company. Workday is the newly public cloud-based provider of human resource and corporate finance software. The combined product synchronizes employee information with information related to the operation of the company. It’s available via the Informatica Marketplace and NetSuites’s SuiteApp.com.

Moreover, Informatica Cloud Connector for Amazon’s petabyte-scale Redshift, which provides a low-cost data warehousing service, will help Informatica customers to access Redshift customized for them.

For Informatica Corporation (NASDAQ:INFA) shareholders this is great news. Customer usage of Informatica’s newer products has increased consistently, from 4% in 2007 to 40% in Q1 2013. This has led to substantial growth of Informatica’s subscription revenue, which consist primarily of revenues from customers and partners under subscription-based licenses for a variety of cloud and address-validation offerings.

With growing adoption of Informatica Corporation (NASDAQ:INFA)’s newer products, the company has become well positioned for a bigger, largely untapped cross-selling opportunity. This will further increase Informatica’s subscription revenues and boost the company’s bottom line going forward.

Informatica Corporation (NASDAQ:INFA)’s involvement with NetSuite Inc (NYSE:N) will be positive for the latter as well in terms of revenue growth and cash flow generation. NetSuite’s total revenue for the first quarter of 2013 was $91.6 million, representing a 32% year-over-year increase. Cash flows from operations were $14.7 million in Q1, an increase of $4.1 million, or 39%, over the same period in the prior year. Zach Nelson, CEO of NetSuite, said:

While traditional software companies continued to struggle, NetSuite delivered arguably the finest Q1 in our history. NetSuite’s success is driven by the fact that businesses around the world realize that in order to achieve their business vision, they need to move their core operational systems from pre-cloud software like Microsoft Dynamics GP/Great Plains and SAP to NetSuite’s modern cloud-based suite of applications.

Workday Inc (NYSE:WDAY) recently announced two new applications, Workday Big Data and Workday Recruiting, which are scheduled to be launched in the second half of 2013 and early 2014 respectively. Workday’s association with Informatica is expected to be helpful for early adoption of Workday Inc (NYSE:WDAY)’s upcoming applications.

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