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

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.

2. Informatica partnered with Teradata for Big Data Analytics:

Informatica Corporation (NASDAQ:INFA) partnered with Teradata Corporation (NYSE:TDC), the analytic data solutions company, and announced that the “Informatica Platform is now part of the Teradata Unified Data Architecture™ (UDA), delivering ‘map once, deploy anywhere’ data integration optimization across Teradata Data Warehouse, Teradata Corporation (NYSE:TDC) Aster and Hadoop, based on cost and performance.” Informatica added:

The combination of the Informatica Platform and Teradata UDA allows organizations to use the Informatica Virtual Data Machine to map data integration processes once, and then deploy them to run on workload-specific platforms within the Teradata UDA to power many type of analytics – all within a single data architecture.

Informatica shareholders should note that this partnership with Teradata Corporation (NYSE:TDC) will open up huge upselling opportunities for Informatica for their core products, apart from an even bigger cross-selling opportunity for their expanded product portfolio. This will eventually translate into significant top and bottom-line expansion for the company. In a conference call post Q1 earnings, Informatica management said:

In Q1, a telecommunications leader chose Informatica and Teradata UDA for one of its top business initiatives. By integrating and analyzing billions of customer call detail records and millions of customer profiles and behaviors, this telecommunications leader expects to increase competitiveness and to gain market share.

Teradata Corporation (NYSE:TDC) CEO Mike Koehler said that the company “got off to a slow start in the first quarter of 2013″ and continued to “see softness in large capital purchases.” He added that the company has “strong market momentum with our Aster Big Data Analytics and Integrated Marketing solutions as well as our Unified Data Architecture which helps organizations drive value from all of their data,” and plans this year to “increase our investments in research and development and market coverage in order to further advance our leadership positions and grow our revenues in Data Warehousing, Big Data Analytics, and Integrated Marketing Management in the years to come.”

Conclusion

Apart from cloud and big data, Informatica Corporation (NASDAQ:INFA) introduced its master data management solutions for healthcare organizations. Its Proactive Healthcare Decision Management tool offers real-time monitoring of patient data for greater patient safety. Informatica has been awarded Salesforce.com’s AppExchange Best of 2012. It’s an excellent stock for long-term investors with a market cap of $3.8 billion. It has all the ingredients for becoming a reputable big-cap company.

The article This Is a Solid Stock in Cloud and Big Data originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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