SPSS' Data Indicate a Lively Future

"If you can look into the seeds of time,
And say which grain will grow and which will not,
Speak to me..."

Macbeth
Act I, Scene 3

The business of Chicago-based SPSS (SPSS - commentary - Cramer's Take) is predicting the future, or, more formally, predictive analysis. Its primary investigative resource is numbers. Lots and lots of numbers.

The breath and depth of the applications for predictive analysis are very impressive. For example, SPSS' products are used to spot outliers in data series; this can help pinpoint fraud or money-laundering. Sometimes the outlier is nothing more sinister than a simple error in processing a paycheck. Either way, these mistakes can cost businesses millions of dollars.

One example occurred at HSBC Holdings, one of Britain's largest banks. The company's credit-card holders conduct 125 million transactions each day. The problem was that the complex rules governing income fees paid by the receiving bank to the cardholder's bank were not always being properly carried out. That's where SPSS came in. Within two weeks, its data-mining software found that the income received for certain transactions fell far short of what should have been received. HSBC said that by recovering the underpayment, it expects to generate more than one million pounds a year.

SPSS also helps marketers focus on their proper customer segment. Its data-mining helps companies find hidden cross-selling opportunities. NASA used SPSS to help spot potential problems in shuttle launches. SPSS helps the National Forest Service spot trends in the number of bear encounters throughout the national parks system.

More Strong Data

For the fourth quarter, the consensus on Wall Street was for SPSS to report earnings of 38 cents a share. Adjusting for charges, SPSS delivered earnings of 50 cent per share, which was a nice increase over the 43 cents per share from a year earlier. The morning after the earnings report, the stock shot up 18%.

The company is due to report earnings again this Tuesday. In February, SPSS told the Street to expect first-quarter earnings-per-share between and 40 and 45 cents. I believe that's a bit of low-balling on SPSS' part. If earnings came in at 45 cents a share, that would be an increase of 15%, the slowest rate in over a year. The company also said to expect full-year earnings of $1.85 to $1.95 a share.

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At the time of publication, Elfenbein had no positions in stocks mentioned, although positions may change at any time. Eddy Elfenbein runs the financial blog CrossingWallStreet.com, and has several years of experience in the financial newsletter industry. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Elfenbein appreciates your feedback; click here to send him an email.