Teradata Corporation (TDC) recently announced that Blue Cross and Blue Shield of Minnesota, a nonprofit independent licensee of the Blue Cross and Blue Shield Association, will be supported by Teradata’s data warehouse appliance and professional services.
Blue Cross expects that the Teradata platform will enable it to improve customer satisfaction, as the quality of information will improve, which in turn will enable it to improve the quality of its services and also introduce new services where relevant. Additionally, it expects improvements in insurance claim processing costs and time, which could help generate additional business for the company.
Teradata, with its consulting services and tools, will help Blue Cross offer healthcare administration and IT operations more cost effectively, without disrupting operations during installation. It will also provide important and efficient data that would support business strategy and solve critical problems, thereby providing improved health care services to Blue Cross members.
In our view, the data warehousing market is mature and has been dominated by large players like Oracle Corp. (ORCL), International Business Machines Corp. (IBM), Microsoft Corp. (MSFT), Sybase and SAP AG (SAP). Teradata is up against increasing competition from larger players in the data warehousing industry, which is leading to market share erosion. These large technology vendors have greater resources for increased technology investments, resulting in lower sales at Teradata. As a result, Teradata will continue to face severe pricing pressure, which may be expected to hurt its margins.
But, we expect synergies from acquisitions, improved traction from sales force expansion, new products and alliances, market share gains and a growing database analytics market to act as tailwinds for the company.
Although we maintain our long-term Neutral rating, we currently have a Zacks #4 Rank for Teradata Corp., which implies a Sell rating in the short term (1-3 months)
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