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Summary

  • Thursday morning, Attunity (ATTU) announced Q1 revenue of $7.2 million, representing 54% growth. License revenue was $3.5 million, up 102%.
  • One subject of much discussion was its latest offering, Attunity Maestro. Maestro is Attunity’s new Big Data Management Platform for composing, conducting, and monitoring information flow across entire global enterprises.
  • Maestro has the potential to elevate ATTU from a point-solutions provider to a full-solutions provider.

"Our latest announcement is a game changer for us. It is a platform that will elevate us to much higher level." -Shimon Alon, Attunity CEO

Thursday morning, Attunity (NASDAQ:ATTU) announced Q1 revenue of $7.2 million, representing 54% growth. License revenue was $3.5 million, up 102%. Attunity Replicate sales grew by over 140% versus the year-ago period. The earnings call and my subsequent one-on-one with Attunity's management team provided ample evidence that the company is continuing to make very nice progress.

One subject of much discussion was its latest offering, Attunity Maestro. Maestro is Attunity's new Big Data Management Platform for composing, conducting, and monitoring information flow across the entire global enterprise. As the description implies, Maestro will be primarily geared towards the Big Data market. It aims to manage the information flow between all processes and outlets; and between all Big Data participant. The platform will primarily do design, execution, and monitoring of information flow across the enterprise.

ATTU mainly views Big Data as multiple points / sources of information. Today there are more than ever. Adding up the myriad data banks within a large organization often yields hundreds, if not thousands, of sources. What's worse, the data is constantly changing and moving. Multiple pieces of data need to be moved to multiple destinations to be analyzed, stored, deleted, or just passed along.

The traditional market in which ATTU played was characterized by one-to-one or one-to-few movements of data. However, the Big Data market is an environment that calls for data movement to be many-to-many, many-to-one, cascaded, or one-to many. It's a very complex information flow that has to be designed, managed, and monitored.

This is what Maestro aims to do.

Today, we find that people are moving from hundreds of servers to a database…or from a few databases to hundreds or thousands of servers. As a result, ATTU is already answering such requests to support some very large networks to replicate and move / transfer data across dispersed enterprise environments. Maestro's role will focus on developing and maintaining the topology.

In a typical Maestro use case, a user would look at all the links in the network and create a topology that automates what data needs to be sent, where it's needed, and when it's needed. Maestro will also provide optimization of the flow. If something is changing in the data, process flows can keep moving in such a way that things don't get bottlenecked or repeated. You don't have to wait for one process to finish for the next to begin. Finally, ATTU will provide visualization. So, even with thousands of servers, customers will know who has what, who completed which transfers, and who did not - all in a single dashboard.

On April 7, ATTU demonstrated its first iteration of the platform, which featured file distribution and replication. Further enhancements will focus on data replication. The goal is to integrate everything ATTU does, including its support for SAP and other enterprise software companies. Ultimately, ATTU aims to deliver a platform that will be the top layer of everything its customers are doing in Big Data.

If you look at typical enterprise decision-making, the factors that drove ATTU to create this solution included some of its customer currently-unmet requirements. These have been melded with ATTU's own vision for where the market is going and what will be needed as the market evolves. Of course, the risk is that the market moves in another direction, but the potential reward of being the first / only vendor to meet the demand for structure and unstructured automated data distribution platform can be much greater than the R&D investment involved.

For now, it appears that ATTU's vision is coming to pass. Customers are moving from one instance of Replicate (for example, to move data from London to New York) to several, with the goal of eventually linking every end-point (and each stop along the way). So, a customer currently replicating for 3 different points could just as easily require 40.

One interesting use case that comes to mind amidst this news is ATTU's relationship with Kongsberg, a $2.7B global company offering a leading collaboration platform for the offshore & maritime industries.. ATTU is enabling (for example) data flow, via satellite, from different ships around the world to one central location in Norway. This started with a 20-ship use case, but customers are looking to do it with thousands of ships across several centers / regions. It involves companies that have hundreds of ships from one provider and another hundred more from another provider. It's clear that the complexity will require comprehensive platform to design and manage the topology.

According to Mr. Alon, customers are waiting for these (and more) capabilities today. ATTU is also in the process of building these capabilities for Hadoop.

Looking at ATTU's ability to market and sell these new solutions, Mr. Alon stated that the tenured members of the sales force are operating on all cylinders. Its newer sales people are in the process of being ramped up. To date, ATTU's experienced file-replication personnel were quietly introduced to the product over the past few months. ATTU's data-replication personnel will likely be introduced next quarter. Mr. Alon expects to see deals to be signed as early as Q2, and certainly by Q3. In fact, the recent NAB conference generated "very attractive leads".

As far as quotas go, it can be expected that the company's file replication quota will increase. This represents a marked shift from the declines that ATTU experienced in this legacy area of the business during 2013. In fact, we believe that this part of the business is now contributing to company growth (albeit modestly), rather than detracting from it. This should help the company goal of achieving $34-37 million in revenue (over 40% growth) in 2014.

Taking all factors into consideration, we believe that the company's pipeline is growing in a manner consistent with the company's goals. We also believe that existing-product ASPs are rising, due in part to it growing reputation in the marketplace. With the introduction of Maestro, ATTU will now offer a product with the potential to support ASPs as high as 10x its RepliWeb enterprise solution (which typically sells in the $30,000-60,000 range), potentially adding a few hundred thousand dollars to deals that involve Maestro.

At present, the company has 26 sales reps, which is nearly double the 15 they employed six months ago (and higher than the target of 23 to which ATTU was guiding back in late-November). We believe the company will digest this sales force growth over the next six months and determine where more sales people are needed. In the meantime, we believe that its original 15 sales people are performing well as a whole and that the 11 additions are well on their way to becoming meaningful contributors to growth. Using simple math, the 73% increase in sales headcount holds the potential to deliver a commensurate level of license growth, which is comfortably in excess of management's revenue guidance for 2014.

Disclosure: I am long ATTU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Aspects of this report originally appeared in the PTT Newsletter for May 1, 2014 at PTTResearch.com. Mr. Gomes' investment Methodology is the basis of his selection process, as well as his asset allocation and trading decisions. Investors who seek to act on his research should first read his Methodology and Portfolio Tracker which are freely available to the public at PoisedToTriple.com.

Source: Attunity's Maestro Promises To Make Sweet Music (And Money)