Good morning, ladies and gentlemen, and welcome to the Teradata Q1 2009 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Mr. Gregg Swearingen. Mr. Swearingen, you may begin.

Good morning and thanks for joining us for our 2009 first quarter Earnings Call. Mike Koehler, Teradata's CEO, will lead our discussion, highlighting Teradata's first quarter results. After Mike's remarks, Steve Scheppmann, Teradata's Chief Financial Officer, will provide more details relating to our Q1 performance. Darryl McDonald, Teradata's Chief Marketing Officer, who is also responsible for strategy and business development is in the room as well. Our discussion today includes forecasts and other information that are considered forward-looking statements. While these statements reflect our current outlook, they are subject to a number of risks and uncertainties that could cause actual results to vary materially. These risk factors are described in Teradata's 10-K and other filings with the SEC. On today's call, we will also be discussing certain non-GAAP financial information, such as free cash flow and revenue comparisons in constant currency. A reconciliation of our non-GAAP results to our reported GAAP results, and other information concerning these measures, is included in our earnings release and on the Investor page of Teradata's website, which can be found at www.teradata.com. A replay of this conference call will also be available later today on our website. Teradata assumes no obligation to update or revise the information included in this conference call, whether as a result of new information or future results. I will now turn the call over to Mike.

Thanks, Gregg, and good morning, everyone. Teradata got off to a good start in 2009, with constant currency revenues up 5% and earnings per share growth of 13% in the first quarter. Operationally, we executed well. Both gross margins and operating margins improved meaningfully over the prior year. SG&A expense was down 5% and overall expenses were down, while absorbing key ongoing investments we are making to build for our future R&D, adding new sales territories and strategic partnerships. Looking at our performance by region on a constant currency basis, EMEA grew 12% over prior year, APJ grew 9% and the Americas was up 1% over prior year, which was a solid performance given that the Americas was coming off of a strong Q 4 where revenues grew 14%. Overall, we saw good user base activity in the first quarter. Customers continue to value and invest in Teradata to help operate their businesses more efficiently, reduce costs, find new sources of revenue, and enhance their customer relationships. Upgrades included Delta, Continental, Air Canada, and Qantas, as the airline industry looks to improve fuel management, revenue yield management, and to personalize customer communication and marketing. Retailers, such as Carrefour, the world's second-largest retailer, upgraded its Teradata environment to enable marketing activities for over 14 million households in France, and to achieve a 360-degree real-time view of its customers across multiple customer contact channels. JD Williams in the UK, who is now doing customer analytics across all channels, including the web, to market the customers in near real-time. Trunk call activity included China Mobile, Vodafone Australia, Q-Star, the UK's leading telco, and Bouygues Telecom in France which is reducing costs while consolidating numerous data marks into its Teradata active enterprise data warehouse. Upgrades at financial services institutions included UniCredit Group in Italy,…

Thanks for joining us this morning. Thank you for your continued interest in Teradata. We are committed to actively working with our customers to re-architect their information, to allow them to aggressively pursue opportunities in the areas of cost reduction, risk management, asset management, and revenue generation. We had another good quarter, and we were encouraged by the resiliency of our business model given the tough macroeconomic conditions. Our flexibility created by our strong capital structure and our free cash flow model allows us to pursue our four key strategic initiatives that Mike referred to earlier, even in this economy. Now for a closer look at our financial results for the quarter. Teradata's Q1 2009 revenue of $367 million was up 5% in constant currency from the first quarter of 2008, but down 2% as shown in US dollars. By region, revenue in Americas was down 2% as shown in US dollars. EMEA was down 6%, while APJ was up 5%. Our constant currency revenue increase was driven by good performance in EMEA region and the APJ region where revenues were up 12% and 9% respectively. From a revenue segmentation perspective, product revenue of $157 million was down 5% from first quarter of 2008. In constant currency, product revenue was up 2% from the first quarter of 2008. Services revenue in the quarter was basically unchanged from the $210 million generated in last year's first quarter. In constant currency, services revenue increased 7% from the first quarter of 2008. Maintenance revenue was $104 million, which includes maintenance on software and hardware solutions. This was a 1% increase from the first quarter of 2008. Currency headwind had a meaningful negative impact on our year-over-year maintenance revenue comparison. On the constant currency basis, maintenance revenue increased 6%. Professional and installation-related services, which…

(Operator Instructions). Our first question comes from Katie Huberty from Morgan Stanley. Please go ahead.

Thanks. Good morning. So, obviously a phenomenal March quarter after a strong December. So, I guess, the question is, whether you think you have stolen revenue in earnings from later this year, or if, these fundamentals are just a clear sign that data warehousing is facing different spending patterns than the rest of technology this year?

Katie, this is Mike Koehler. We had the normal deferrals and spillovers from Q4 to Q1, Q1 to Q 2, so I don't think there's anything indicative there as far as any movement of revenues, okay? The challenge that we've got is the lack of visibility going forward. Clearly, we have some pretty strong activity going, in particular, in Europe and other places of the world, not as strong. So, at this juncture, it's a little too early to tell and like the visibility isn't there as far as getting a picture for where this thing is headed.

Can you expand on some of the qualitative commentary around the pipeline of deals and maybe the number of conversations you're having with new customers today versus where you were at exiting the fourth quarter, understanding that some of those are 12-plus month lead times?

I would say activity is very similar to what we saw coming out of the fourth quarter. So if you go back to what we said back in February, and what we were seeing in terms of activity around the world, it's very similar. EMEA continues to have extremely strong activity. They have a good pipeline. The challenge we have in EMEA like we had in the first quarter is about a 17% currency headwind and the thing that is a little bit different about Q2, well, actually, it's significantly different in Q2, as EMEA had biggest quarter ever last year in the second quarter and they grew revenues 33%. That said, the EMEA activity in the pipeline is very good, new customers as well as everything across the board. In Asia Pacific/Japan, once again the activity in the pipeline is good outside of Japan. What we saw coming out of the fourth quarter was softness in Japan, outside of Japan. The overall activity in pipeline remains strong. The Americas coming out of the fourth quarter, what we said was the number of mature opportunities in the pipeline was lagging. It was down sequentially from the fourth quart as you'd expect with the big fourth quarter that we had in the Americas. Going into the second quarter, once again the amount of mature deals in the Americas are still lagging where we need them to be. That said, the overall metrics in the Americas, the new funnel activity, is up. The amount of dollars in the funnel related to new accounts is up in the Americas funnel, but the economic conditions continue to delay and push out the maturity of some of these deals and the closures.

Okay. Then just lastly, I understand the run rate may change if the economy worsens from here, but given what you know today, how quickly do you expect to put the additional $300 million of share buybacks to work?

This is Steve. As we said before, we'll still be prudently active in the market. I used all the qualifiers, working capital needs, other alternative uses, etcetera. So we will still be prudently active. Given the lack of visibility into 2009, I want to make sure we still maintain a balanced capital structure. So, this additional authorization gives us more flexibility and we'll operate with that flexibility on a prudent basis through 2009 and 2010.

Our next question comes from Brian Denyeau from Oppenheimer. Please go ahead.

We could drill into the services margin for a second. You did a good job of laying out what you have done there to improve the cost. How sustainable is that and have you sort of reset the bar on what services margin can be going forward?

Brian, as I look at services margin, I mean, this is a very good indicator of the result of the lumpiness of the Teradata model. We had a very good yield on our revenue in Q1, if you look at that yield compare to Q1 last year. Again, the Teradata model, depending upon the deal mix, depending upon the quality of the deals can generate some of the lumpiness in that margin yield. At this point in time, that's how I would classify it. It's something that we will experience time to time, something that we are going to have to, that we recognized as being challenging in some other times. So, I won't read anything into the trend on the PS margin at this point in time other than the mix of some of the deals coming through. But, it is something that we are constantly focused on.

Okay, that's helpful. For a second on EMEA, very good growth there, and certainly you guys are outperformed relatively to your peers in that market. Can you help me understand what's going on in terms of how you are getting now a demand generated, but getting the deals actually done?

We are getting good growth in the emerging markets. We have been adding resources there as well. We've had good results across the boards and across all the geographies. We are very strong in telcos there, which in this environment is a decent industry relative to some of the other ones. We've also had very good success in financial services as companies looked to get more visibility and granularity into their information systems. So, it's been growth that's occurring on a geographic basis within Europe and growth that's been occurring across a couple industry segments, key industry, large industry segments in Europe. It's benefitted us very well.

Lastly, can you just talk about what you're seeing in the retail vertical so far this year and your expectations going through the rest of the year? Thanks.

Good question. The two industry segments that saw the biggest growth for us in the first quarter, and once again a first quarter isn't a trend but you cobble it together with what we saw last year, financial services was up quite a bit in the first quarter. The other industry segment that was up was retail by quite a bit. Once again that quarter doesn't make a trend. However, retail, the largest geography for our retail business is in the US. In 2008, retail, we saw some pretty significant declines in revenue. Typically, the retailers what we have seen over the past history and some downturns seem to get out ahead of this cost and savings in an advance of an economic downturn. We got pretty hit hard in the retail in the US. So, this year, I am a little optimistic that on the retail side that we may bounce back a bit and we had a good first quarter in the retail industry.

Next question comes from the Nabil Elsheshai from Pacific Crest Securities.

So I guess to continue with the vertical stuff, any commentary on telco in the quarter and what you're seeing going forward there?

Once again, in a quarter, I don't think it sets a trend Nabil but you asked a question. The answer is, financial services and retail were up quite a bit. Communications overall globally was down, and manufacturing we had a pretty good drop off in the first quarter. Those are the four major industry segments for the Teradata business. Of the four, I would say the one we see the most softness in overall around the world would be in the manufacturing industry segment, outside of the high-tech sector, those other manufacturing industry segments.

Could you give me the percent of revenue that came from the installed base?

Nabil, we are typically, historically we said the 85% to 90%. We didn't see anything outside in Q1 that would indicate that not to hold true.

Because I think you gave us a 90% on the Q4 call. On the SAP relationship, could you give a little bit more detail on, when that will be supported? If there's any joint go to market plans there? What kind of time frame that would take place?

Sure, Nabil. This is Darryl McDonald. With the announcement with SAP, we currently are working with customers to design the integrated solution that we are going to be going to market with. as you know. The announcement was primarily that SAP BW will run on Teradata. So we have a large number of joint customers today that have both business warehousing and Teradata. So we are working with them now on plans to try to migrate and integrate those. We are looking for the timeframe, is early beta customers in Q4 of 2009 and then GCA in Q1 of 2010. We are currently doing the port and working with customers on activities to try to get to that solution.

They are working with you to identify potential joint customers and go to market together?

Correct. SAP is working with us. We are identifying joint customers together and the opportunity is that it's going to be a sale with model between Teradata and SAP. So we are both going to be working with customers, hand-in-hand, who will sell their software or migrating their software onto the Teradata platform which will support the selling and the work around that. It's also our intent to work with the major systems integrators to do this work as well. So we think there will be great opportunity in us ramping up and training the systems integrators in the ability to help with these migrations as well.

Next question comes from Anthony Kure from KeyBanc.

Just a quick question on the tone of conversations and if that change with your financial customers we have heard from other folks saying that there could be a 20 basis points special assessment from FDIC and that was impacting some of their capital decision making. I am just wondering if you have seen any conversations or have heard any change in tone based on that dynamic.

This is Mike Koehler. No, none that we are aware of, that I'm aware of.

On the Oracle's acquisition of Sun, how do you feel that's impacted the marketplace both with those two companies or with Oracle specifically and then how Oracle's relationship with HP on their competitive product, wondering how that dynamic has played out as far as your conversations with customers and the competitive landscape.

As far as the overall impact on the market, overall I won't comment on that. As far as it relates to data warehousing and Teradata, at the end of the day, Oracle is a database that we compete with and they have added a hardware component to it to try to address a piece of the problem in conjunction with HP. What they do with exit data that relates to Sun we don't know but at the end of the day it's a database and there's a hardware component to it whether it's Sun or whether it's HP whereas on the other hand Teradata is all software.

Have you encountered the exit data solutions anymore in pilots or in customer sites any more than last quarter?

We haven't seen too much of exit data to date. There is one customer where we did get heavily engaged and there were benchmarks done. We performed exceptionally well versus exit data, and that's about the extent of it. So there's been maybe three or four accounts where we are engaged with exit data and only one to a detail, what I call a detailed degree. That said Oracle's got a huge market presence. They've got a lot of relationships and everything else and we are very respectful, of them as a competitor. From a technology perspective, we feel very confident about Teradata.

This is Darryl. I just want to add one other comment again to your point about the Sun-Oracle. I think to Mike's point there's probably more impact to other quality key competitors in the marketplace than there is to us because from our perspective we have been competing with Oracle and Sun for quite some time. We still feel very comfortable in our ability to compete and win against those two products in the marketplace.

Just given the results of the first quarter I know you talked about visibility being clouded and you gave a little color on the second quarter but I just wondered if there's any possible way you can maybe provide some sort of full year parameters for EPS expectations.

Anthony, as I've said, the current market conditions and the visibility in the second half particularly as it relates to our product revenue makes extremely difficult to provide specific guidance around 2009 revenue and EPS. On top of the traditional Teradata lumpiness that we have all come to love and hate, it makes it difficult. If I really look at our internal sites and I say, okay focusing on flat revenue and constant currency, with our sites on flat revenue in constant currency and that's adjusting for 5% FX headwind. That would translate into an EPS of approximately $1.10 to $1.20. you know, given those metrics. Again with the visibility being tough, to give specific guidance at this time would be extremely difficult.

Next question comes from Greg Holter from Great Lakes Review.

I wondered if you could comment and I know you have made some commentaries earlier about the DSOs but just wondered if you could comment about your accounts receivable quality overall on [agents] and so forth.

The accounts receivable quality on [aging], we continue to see improvement on the DSO. Our accounts receivable base is a global 3,000. and one comment that I can make on there is that we have not seen anything significant increase in any of the write-offs on it. We believe we have taken an adequate reserve position at this point in time given the macro economic conditions and we haven't seen any significant deterioration out of the unusual or out of the normal on that receivable base. We have seen improvement in the DSO through March 31st, 2009.

Is your allowance still around $11 million?

Yes the allowance is still around about the $10 million range where we are at 12/31/08. I should say the reserve.

What would you anticipate your capital spending all in to be for 2009?

Capital spending, again we traditionally have said $75 million to $85 million including capitalized software. I would anticipate that to be very similar.

Looking at the competitive environment, any significant changes there that you can comment on, or would like to comment on?

This is Darryl McDonald. Not really. I think the competitors that we have been competing with for the last six to 12 months remain the same. I think we feel very confident now that we have our platform family, that we have both the platforms and the price performance to compete at all levels from the entry level to appliances to the enterprise data warehouse. So, I'd say, at this point in time, we are just in a great position to compete and nothing has really changed on that landscape for us.

Okay. I missed early in the call, Michael, where I think you indicated how many new systems were sold, was that 12?

It was a total of 15. There were 12 2550s and three 1550s in Q1.

And one last one. I noticed that the company has had more releases in the past with Winn-Dixie and Juroku Bank and BVBA in publics and so forth. Are these new, are they expansions? How should we are looking on the outside gauge these announcements?

We typically denote in the press releases if it's a new customer or system expansion. So what you're seeing in each quarter is a combination of both. So, typically around some of the big events like we just had our Teradata EMEA Universe, there might be a larger number that gets produced as a part for that event. But it really just coincides with the selling and then getting alignment with the customer to do press release. Sometimes, they are in the quarter. Sometimes, they lag the quarter, really just depends upon their willingness to let us promote that.

You have a follow-up question from Nabil Elsheshai. Please go ahead.

Just real quick. On the sales of the 2550s, could you comment a little bit about the type of customer in terms of installed base and how that broke down versus new customers and installed base customers?

In the first quarter, Nabil, three 2550s went to new customers and nine went into our user base.

Okay, great. Thank you.

Our next question comes from Doug Reid from Thomas Weisel Partners. Please go ahead.

Thanks for taking my question. Congratulations on the strong results. Really question is on the 2550. Hoping to understand how margins on that compare to your other products in your mix and whether or not those margins held constant during the quarter?

The margins across the platform family are pretty consistent from high-end to low-end to 1550 to 2550.

Okay, great. Actually my other question was just answered. Thank you.

Okay, thank you. I think that's it. Well, we have time for one more question.

Operator, any more questions left

I am showing that we have no further questions.

I want to thank everyone for joining us this morning. We are pretty pleased about the first quarter. We are very encouraged. One quarter doesn't necessarily make a year. We have a lot of work to do, but nevertheless we are off to a good start in Q 1, from which to build on for 2009, and more importantly, to also keep investing in our future. So thank you everyone.

Thank you, ladies and gentlemen. This concludes the Teradata Q1 2009 earnings call. Thank you for participating. You may all disconnect.