Welcome to the Q4 2012 Teradata Earnings Call. My name is John, and I'll be your operator for today's call. [Operator Instructions] 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 2012 Fourth Quarter Earnings Call. Mike Koehler, Teradata's CEO, will begin today by summarizing Teradata's fourth quarter and full year results. Steve Scheppmann, Teradata's CFO, will then provide more details regarding our financial performance, as well as our guidance for 2013. 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, which excludes such items as stock-based compensation and other special items. We'll also be talking about other non-GAAP items such as free cash flow and constant currency revenue comparisons. 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 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'll now turn the call over to Mike.

Thanks, Gregg, and good morning, everyone. Teradata finished the year with a solid fourth quarter. Revenue grew 10% over prior year, and was up 11% in constant currency, and non-GAAP earnings per share of $0.79 was up 20% from Q4 2011. For the year, revenue of more than $2.6 billion was up 13% as reported and 15% in constant currency. Non-GAAP earnings per share of $2.85 increased 23% over 2011. Overall, a very good year. Turning to the regions. The Americas fourth quarter revenue grew 8% as reported and 9% in constant currency, and for the full year, revenue was up 13% as reported and in constant currency. New customer wins in the Americas during the fourth quarter included: O'Reilly Auto Parts; USDA Food Safety and Inspection Service; the state of Ohio, which will use Teradata for health and Medicaid spending analytics; the Ministry of Social Development in Brazil, which will be using Teradata to detect fraud and ensure that families benefit from the best use of public resources; CHRISTUS Health, which is integrating its clinical data across facilities to improve the quality of patient care; Bankview will be using Teradata for sales, click stream and marketing analytics; Pacific Gas & Electric, which is implementing Teradata for its smart meter data warehouse; Nautilus, a global fitness company, has purchased the Aprimo campaign management solution to support its marketing; and we added 2 Fortune 100 customers in the U.S. with plans to build out large-scale EDWs. Expansions and upgrades in the Americas included: the U.S. Defense Commissary Agency; Hospital Corp. of America, which has added clinical applications to support healthcare reform requirements; Harvard Pilgrim Health Care, who used Teradata to help them expand from B2B into B2C; and Mohigan Sun Casino, which is using Teradata to support its 360-degree view of…

Thanks, Mike, and good morning. Teradata generated fourth quarter revenue of $740 million, which was up 10% from the fourth quarter of 2011 and up 11% in constant currency. This was a solid result given the backdrop of the macroeconomic uncertainty that tech industry experienced, particularly in the latter part of 2012. For the year, revenue was up 13%, 15% in constant currency. The influence of the macroeconomic drivers, particularly in the U.S., resulted in a sharp contrast over the course of 2012, as reflected in our revenue growth for the first half versus second half, particularly in the Americas. In the first half of 2012, we grew 18%, 20% in constant currency versus 9% or 10% in constant currency in the second half of the year. In the Americas, we grew 22% in the first half versus 5% in the second half of 2012. Product revenue of $362 million was up 9% from the fourth quarter of 2011, up 10% in constant currency. For the year, product revenue was up 16%, up 17% in constant currency. In the first half, product revenue was up 25% compared to 8% in the second half of 2012. Services revenue of $378 million was up 11% from the fourth quarter of 2011, both reported and in constant currency. For the year, services revenue was up 10%, up 12% in constant currency. Within services revenue for the quarter, consulting services revenue was up 14%, up 15% in constant currency, and maintenance services revenue was up 6%, up 7% in constant currency. For the year, Consulting Services was up 12%, up 14% in constant currency, aided by acquisition activity. And maintenance services revenue was up 9%, up 10% in constant currency. Now I'd like to furnish some color on how our industry verticals influenced our…

[Operator Instructions] Our first question comes from Katy Huberty from Morgan Stanley.

There were a number of promising metrics in the fourth quarter. Consulting growth accelerated off of the lows in June. Deferred revenue was better than seasonal. It looks like you invested the revenue upside in more sales heads. And based on the DSOs, it looks like you saw strength in December similar to what you've seen and others have commented on. So can you just help us better reconcile those metrics, which would suggest that a good growth rate continues with your more cautious comments on the first half? I understand there's tough compares, but what are you really seeing that would offset those metrics that suggest that you're set up for a pretty good 2013?

Thanks, Katy. This is Mike. Yes, I think what you're alluding to, if you look at the fundamentals in the company, the fundamentals are very, very sound, and we're going to continue to invest at a rate that we've been investing the past several years. And longer term, we see a very, very good picture for Teradata. And basically, what's happened shorter term is the economic uncertainty, and then, in particular, the number of large deals that we currently have in play and the size of those large deals are down in the Americas. So that is the one metric when you step back and look at everything that has caused the conservatism in our guidance when you look at the entire year for 2013.

And did you just -- as a quick follow-up, did you also see weak or lower number of large deals in the fourth quarter?

We definitely did in the third quarter. The fourth quarter in the Americas actually came back a little bit. There might have been just a little bit of budget flushing. So the number of large deals and the size of the deals in Q4 were down, but not to the degree they were in the third quarter, and not what we're currently seeing right now. And I just want to comment that this is what we're seeing right now. Everything is subject to change, and we'll adjust guidance appropriately if, in fact, anything does change here in the near future.

Our next question comes from Matt Summerville from KeyBanc Capital Markets.

This is Joe Radigan, on for Matt. With respect to your 2013 outlook, how much revenue growth do you expect to come from the legacy business versus the new product lines that you've added over the last, I guess, several years? .

Joe, I would say at this point in time, it's all based on a normal evolution product cycle so it's all just rolling. So there's really no distinction between legacy and old or the new stuff. It's all just on a recurring cycle. Nothing unusual in those revenue numbers or our estimates. Everything is really consistent to what we have seen in the past. And Aprimo is as we expected, and it's kind of built now down into the core application business. And Aster's small in the prior years, and we're not anticipating any great upside in 2013, but progress is being made in the Aster area.

Our next question comes from Phil Winslow from Credit Suisse. Philip Winslow - Crédit Suisse AG, Research Division: I just want to actually go back into the Q3 call. I think from your comments about just excess capacity, your customers were kind of -- are misunderstood by some of the investment community. I wonder if you can clarify those. But also, kind of put that into the context of what you're saying about folks just running their data warehouse higher and buying in smaller increments, how that's kind of affecting your thinking about sort of those first half versus second half growth rates?

Yes, so this is good. I want to clarify this because what we didn't talk about on the third quarter was that there's excess capacity, and let me try to explain it this way. When the customers are adding capacity, they're adding performance capabilities that come from the CPUs and the IO that they're adding in order to accommodate newer applications, more users and more queries, right? And Teradata EDWs are designed to run it at 90% to 100% utilization all of the time. So in effect, they're really theoretically is never excess capacity. So each time a customer needs to add more users application or queries to their enterprise data warehouses. They got choices. They can choose to add more capacity. And by the way, they can do it in small increments because Teradata has this coexistence capability that you can bolt on small increments to older types of technology or they can choose to throttle back performance or response time selectively for existing users or applications or queries, and this in turn frees up capacity to meet the new demand. So that's the choice they have to make. Teradata has great technology. We have this Workload Management software, allows customers to do this, and they can pinpoint the throttling back of performance with precision for specific users, applications and queries. Now the comment about the Americas adding a lot of capacity, what happens is when customers have added a significant amount of capacity over a couple year period, this means that there has been a lot of users, applications and queries added to their EDWs. This, in turn, means there's more places to choose from to throttle back the performance than there was versus a couple of years earlier in order to free up performance capacity. So basically,…

Exactly. And what happens is -- I mean, we're aware of some customers where the business users are starting to make a lot of noise because they would like a faster response times and a better SOA with their utilizations of the data warehouses. So over time, the noise gets a little louder and louder and in some cases, it impacts the business and then, yes, the customer's got to add the capacity.

Our next question comes from Wamsi Mohan from Bank of America.

Mike, the 6% to 10% growth range, can you maybe give us some color how that compares to what you think the overall market is growing at, or perhaps some color on if you're still taking share or is there -- are there pockets where you're actually losing share there?

Wamsi, as far as how it compares to market, I'm not aware of data that is something that we could hang our hat on or compare our results and our growth rates with. The only thing I can comment on is we win a significant number of new customers every week, every month, every year and when we do that, we're replacing competition. When we expand our EDWs, we're wiping out data marts and competitors' small data warehouses, if you will. And our share and our win rates are -- they're the same as what they've been and they're extremely high. I think when you step back and look at it, what we're competing with -- in our enterprise data warehouses, what we're competing with is we're competing for budget. And when the budget isn't growing, we can't get our chunk of the budget so that is the biggest issue. We don't really have competitors in the enterprise data warehouse space to speak of and it's more of a budget thing. We need to gain market share of the customer's budget, if you will.

And as a quick follow-up, can you talk about the territory expansion plan of 20 to 30 in 2013? I mean, when we look back a few years ago, back in '08, '09 time frame, you invested quite aggressively in sales territories, which in the hindsight, proved to be the right decision. So there's deceleration. I know you're still investing and still adding 20 to 30, but what's the reason to step that down from the 30 -- 35 to 45 that you've been doing over the last couple of years?

The 20 to 30, Wamsi, we would be adding this amount, whether we were guiding a higher number or a lower number of revenue. It all gets at we're moving Aster, Aprimo and eCircle globally, and this is a heck of a market opportunity. You look at eCircle with a leading market position in Europe and now we have wins in the U.S. and we're coming in the U.S., and that eCircle has leading digital messaging technology. Similarly with Aprimo, heavily concentrated in the U.S. when we acquired them. Now we're growing footprints out into Europe and into China, and we're going to grow that all over the world. And then when you look at Aster, the early adopters of Hadoop, big data and analytics are in the U.S. Now we're expanding Aster into Europe as well as Asia. So what we've done is we're investing into selling expense, consulting expense, demand creation expense at the same rate we were over the years, but we're adding more sales specialists, consultants, subject matter experts in the different parts of the world where these solutions aren't heavily penetrated. So it's a trade-off of traditional Teradata, data warehouse kind of territories, or -- well, they're Teradata territories that sell everything and adding more specialists to get after the deployment of these solutions globally, which is a great opportunity for us.

Our next question comes from Greg Dunham from Goldman Sachs.

I did want to follow-up on this kind of 4Q to 1Q dynamic. Given December was strong, were close rates better than expected in December? And what are your assumptions for close rates going into 1Q when -- in terms of your commentary?

Gregg, there's no difference in close rates. That's not the issue at all. It really gets down to the number of large deals and the size of the large deals in the Americas. That is -- basically the close rate's no different. The amount of the budgets and the uncertainty in our customer base that's helping to drive to less large deals is a factor.

Then the follow-up. It sounds like, obviously, the pipeline is smaller in 1Q. Can you maybe comment on the pipeline just overall? I mean, is it a more back-end-loaded pipeline? Or is this the acceleration in growth driven by easier compares in the back half?

It's a little counterintuitive, but the size of our funnel is actually up. So that's good news. So the overall activity, the number of opportunities, the value of all the opportunities is up. The short-term issue we have is the number of large opportunities and the size of the opportunities that are in the closing state in the first quarter. And as we look out to the second quarter, we'd like to see another uptick. This is just a -- we believe it is a short-term type of thing. Companies just aren't committing to large CapEx expenditures, and I can add companies aren't committing to large projects when you look at consulting and some of these other things. So I think we're in an environment where everyone's looking at buying in smaller chunks and doing projects in smaller pieces. And when I make this comment, it's not just specific to Teradata, but it's what we hear from other companies as well.

Our next question comes from Brent Thill from UBS.

Mike, if you can just comment a little bit about what you're seeing in the financial services market for the year, your pipeline and your assumption on some of the close rates going forward. That will be helpful.

Brent, the financial services actually had good growth in 2012. And on top of good growth in '11 and 2010, it continues to be an extremely good vertical for us, and our activity there is good. Our value prop is very much in line with what a lot of these financial services institutions are trying to get done. Specifically, in 2012, financial services grew...

It was strong growth, and one of the stronger growths within all the industry verticals.

Right. So Brent, we see financial services behaving very well.

Okay. So you don't see any type of material slowdown in terms of your pipeline in financial services for 2013?

Currently, when you look at the number of large deals and the size of these deals, it's down some, but not to the degree that we're seeing overall.

Our next question comes from Raimo Lenschow from Barclays Capital.

We focus a lot on the Americas, but can you talk a little bit about Asia? If you look at the growth rates you're achieving there, it looks subpar compared to the opportunity. I know you talked about some of the already -- the changes you are doing there to kind of maybe try help there, but can you just talk about that region a little bit in more detail?

Yes, Raimo. Asia Pacific/Japan does represent a good opportunity for Teradata to increase our performance there if you look back over the past couple of years and how the company is doing overall. We feel good about how we're positioned in China and the very, very good growth we had at the second half of the year. And Japan tailed off a little bit at the end of the year. So we've got this dynamic -- and Japan had some currency going against them as well in the fourth quarter. But when you look at Asia Pacific/Japan, we need to keep China going on the right track. We got to get Japan -- which had good growth overall for the year. We need to keep Japan growing because those 2 markets are so large. And we've got a very large position in Australia that we got to maintain or grow. And it really gets into a lot of the other parts of Asia and Southeast Asia and so forth that we need to get growing at a faster rate. So I think what we've done, and we're loading more expertise, we're injecting more expertise into the region, we think we'll be able to hopefully pick up the pace there in Asia Pacific/Japan. But to your point, this is an opportunity for Teradata.

Our next question comes from Ed Maguire from CLSA. Edward Maguire - Credit Agricole Securities (USA) Inc., Research Division: Could you comment on the momentum you've seen, particularly around the 2000 series? What you expect in terms of adoption, whether that's reflected in customers buying smaller chunks and what the competitive landscape has been around the -- around your appliances?

The appliance, Ed, is growing at a rapid rate, but it's coming from a smaller baseline, if you will. Our win rates are very high. We see no change in the win rates. We've had a recent release with significant performance enhancements to it. And overall, it helps us get customer wallet share, and it helps us acquire new customers and it's been very, very successful and beneficial to the company. In addition, we now are seeing and have had a number of companies that have added a 6000-class EDW to their 2000 environment. Not necessarily replacing it. The 2000 goes into test and development or DRs or different use. So it's worked out extremely well.

Our next question comes from Jesse Hulsing from Pacific Crest Securities.

A couple of questions. First, you may have mentioned this, but what are your plans for services hiring in 2013?

We -- on the customer services side, Jesse, we'll hire to cover the demand and cover the increase in our footprint as we expand our presence around the world. On the consulting services side, we will throttle our headcount and our hiring with the revenue growth. So it's kind of consistent with what we've done over the years.

Okay. And then turning back to Aprimo. How satisfied are you with how that business is trending, how integration is coming with the rest of your business? And do you expect the Aprimo business to trend meaningfully above the growth rate of the rest of your business in 2013?

Jesse, what I'd like to comment on is Aprimo has performed as expected financially, and I would say overall in metrics beyond the financial metrics. Is there opportunities to do better? Absolutely. Are we trying to do better? Absolutely. It's a market-leading solution. If you look at some of the analysts' publishings in the marketing resource management area, we have a huge lead. And I would love for us to get this planted in more customers around the world as soon as we can.

Our last question comes from Derrick Wood from Susquehanna Financial.

I wanted to drill back down into the large deal dynamic in Q1. And aside from the cautious CapEx spend out there, I'm curious if there's other factors in play. So first, are server upgrade cycles having any impact to kind of timing of your -- of capacity upgrade purchases with Teradata software? And then, I guess, second, are you seeing any meaningful mix shift in your pipeline with regards to maybe a higher percentage from the 2000 appliance?

Derrick, the server cycles don't impact Teradata, and it's because of our coexistence capability. And our customers know this and the performance attributes going from one generation of a server to a next or a point where we sent it is not that meaningful. So the answer is no on the server cycles. And on the 2000 mix, the business is running consistent with what it has been doing the past 3 or 4 -- 2 or 3 years where we were looking for a 10% to 15% type of product mix of the 2000 in our overall product revenue and it's been very consistent. So those 2 items, you can rule out as impacts on the -- what we're seeing right now on the large deals. Okay. So I want to thank everyone again for joining us here this morning, and hope you all have a great day. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.