Cisco Financials Disappoint, IBM and Teradata Acquisitions

Cisco Systems Inc. saw its revenue and profits grow significantly for its fourth quarter but the numbers did not meet expectations. The company also cited "unusual uncertainty" in the economy going forward. Meanwhile IBM Corp. announced it was acquiring the document capture software company Datacap Inc. and Unica Corp., a marketing software solutions company, while Teradata Corp. stated it was purchasing analytics appliance vendor, Kickfire Inc.

Focal Points:

• Cisco, a bellwether technology firm, reported fourth-quarter revenues of $10.8 billion, a jump of 27 percent from the previous year's quarter. Net income for the quarter on a GAAP basis was $1.9 billion, up 74 percent from a year earlier. For its full fiscal year, Cisco reported revenues of $40 billion, up 11 percent from the previous year. Net income on a GAAP basis for the fiscal year came in at $7.8 billion, an increase of 27 percent. The 2010 fiscal year was a period of dramatic expansion for Cisco, including the acquisition of Norwegian business video vendor Tandberg and a continued push into the server business following its Unified Computing System introduction in March 2009. The Unified Computing System server business, though still a fairly small part of Cisco's operations, grew quite rapidly. According to CEO John Chambers, the number of customers grew about 90 percent to exceed 1,700. Chambers went on to talk about "unusual uncertainty" in the economy. "We are seeing a large number of mixed signals," he stated. "The economy continues to be the wild card in people's minds." As a result, he stressed Cisco is approaching the coming quarters with caution.
• IBM is purchasing Unica, one of the leading interactive marketing and campaign management software companies, for $480 million. Unica, a global organization with headquarters in Waltham, MA, offers two marketing software product lines: Unica Enterprise and Unica OnDemand. The firm's 500 employees will be integrated into IBM’s Software Solutions Group. Unica has more than 1,500 customers in 69 countries across a wide range of industries including financial services, insurance, retail telecommunications, travel and hospitality. IBM also acquired Datacap, a data and document capture solutions company headquartered in Tarrytown, NY. The company's software enables organizations to transform the way they capture, manage and automate the flow of business information to improve business processes, reduce paper costs or manual errors and meet compliance mandates. Datacap, a long-time IBM business partner, has more than 200 customers across a number of industries in North America. Datacap CEO Scott Blau will become director of enterprise content management in the Software Solutions Group. Financial terms were not disclosed.
• Last week Teradata quietly scooped up Kickfire, a startup analytic appliance vendor that uses the open-source MySQL database and a SQL processing chip to boost query performance. Kickfire targeted customers that had data stores less than 5 TBs and a desire to analyze that information without incurring the expense of a platform like Teradata's. The company was in trouble prior to the sale and rumors were rife that it would not remain an independent company had been circulating for weeks. Teradata currently does not intend to sell Kickfire's existing product; it is interested in hiring its engineers and acquiring its intellectual property (IP). Financial terms of the deal were not disclosed.

Experton Group believes businesses are remaining cautious about future prospects and are investing to reduce costs, especially in the areas of healthcare and employee benefits by increasing labor-saving capital. So while profits may remain strong, companies will carefully control expenditures and limit hiring. The IBM acquisitions will enable the company to provide its customers with a new set of tools that can help reduce costs or improve revenues while containing costs. The IP acquired by Teradata will help the company develop new products targeted at the smaller end of the analytics-business intelligence-data warehousing market, in which it has trouble competing due to its high product costs. Teradata needs to create products for that market segment so that it can capture customers before they develop large data stores and already have installed competitive products. IT executives should search for ways to reduce costs and improve productivity through process improvements and implementation of projects that pay dividends within the fiscal year.