EA, IBM Growth Boosts Niche Data Specialist - TheStreet

EA, IBM Growth Boosts Niche Data Specialist

Informatica may not be the biggest name in tech, but after side-stepping the recession, the software maker is set to continue its growth trajectory.
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REDWOOD CITY, Calif. (

TheStreet

) --

Electronic Arts

(ERTS)

,

Dell

(DELL) - Get Report

and

Qualcomm

(QCOM) - Get Report

have more in common than just a Nasdaq listing. Along with

Johnson & Johnson

(JNJ) - Get Report

and

Motorola

(MOT)

, the tech firms are among the 4,000-plus customers of

Informatica

(INFA)

.

Informatica

, a data integration specialist, may not be the biggest name in tech, but after side-stepping the economic downturn by instigating a few creative management techniques, the company is set to continue its impressive growth as tech spending starts to ramp back up.

"Informatica was one of the few companies that grew throughout the recession," explained Informatica CEO Sohaib Abbasi in a recent interview with

TheStreet

. "Our compound annual growth rate over the last five years was 18%."

The company's share price has enjoyed a healthy uptick, climbing almost 190% since mid-2005. Shares of rival

IBM

(IBM) - Get Report

, which is also an Informatica partner, grew just over 70% over the same period.

Informatica, with a market cap of $2.32 billion, is a comparatively small firm. The company sells software and services to help firms consolidate, migrate and manage their information, allowing them a view of their data across different parts of their business. Governments are also counted among Informatica's customers base; one country, which Informatica won't name, is using the software to match travelers against watch lists.

It's not sexy, but the market is certainly lucrative: Analyst firm Gartner estimates that the global data warehouse and business intelligence market is about $30 billion.

Clearly eyeing growth, Informatica has also been on something of a software-buying spree, snapping up

Siperian

and

29 West

this year, which followed its 2009 acquisitions of

Agent Logic

and

Applimation.

The $130 million Siperian deal in particular is seen as bolstering Informatica's data management capabilities.

Late last year, the company also unveiled its new flagship software, Informatica 9, which it claims can revolutionize how companies access and deliver data. This message seems to be getting through. More than 100 customers were using Informatica 9 at the end of the firm's recent first-quarter, helping Informatica post strong results.

At least one analyst, though, feels that Informatica still has some work to do. "The good news is that the Informatica 9 upgrade cycle is beginning to play out," explained Pat Walravens, an analyst at JMP Securities, in a note released after the company's first-quarter results. "The bad news is that Informatica did not raise guidance for the year and we suspect its organic growth of 14% may have been below the internal plan."

Walravens said that Informatica's organic growth will be higher once the firm "smoothes out" some conflicts between its acquisitions and Informatica 9. Eventually, he said, these issues will be resolved and various customer deals will close for large dollar amounts.

Perhaps weighed down by the challenge of integrating its recent acquisitions, Informatica's stock has dipped 1.97% so far this year, but could present a buying opportunity for investors. The company's shares gained $1.10, or 4.34% on Monday to reach $26.47.

JMP analyst Walravens rates the firm market outperform and recently reiterated his $31 price target.

Management chops gleaned from Oracle

The company is in a good position for the future, highlighting the management skills of

Oracle

(ORCL) - Get Report

veteran Abbasi. Informatica grew its software license revenue each quarter during the downturn, said the CEO, who had the foresight to overhaul the company's sales strategy before the recession hit.

"Towards the end of 2007, we realized there was a change occurring," he said, explaining that is when customers were starting to wrestle with budget issues. "Unlike a lot of software companies that have yearly targets or quarterly targets, we introduced weekly targets for our sales organization."

By chasing weekly targets, Informatica's salespeople were forced to pursue deals that had a greater certainty of closure.

Other big trends driving the company forward include industry consolidation, cloud computing, and, inevitably,

smartphones

.

"All the mobile devices will result in more data being collected," said the CEO. "

And these days, there's even more debate about the privacy of data."

Competing with IBM's Tivoli offering, Informatica is now checking out new technology categories which can be worked into its software.

"We're looking at technologies that are in the data integration space such as geospatial information," said Abbasi. "

And we're looking at extending our product to provide more data security, more data privacy technology."

Abbasi, however, has also vowed to grow the company's customer list. "We want to establish Informatica as the dominant leader in data integration," he said.

-- Reported by James Rogers in New York

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