Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Stephanie Wakefield - VP of IR

Sohaib Abbasi - CEO

Earl Fry - CFO

Analysts

Tom Roderick - Stifel Nicolaus

Michael Tirith - Raymond James

Mitesh Dhruv - Bank of America

Michael Nemeroff - Wedbush Morgan Securities

Mark Murphy - Piper Jaffray

Edward Maguire - CLSA

Nabil Elsheshai - Pacific Crest Securities

Derrick Wood - SIG Susquehanna

Frank Sparacino - First Analysis Corporation

Brian Wallins - Gleacher & Company

Brad Sills - Barclays Capital

Informatica Corporation (INFA) Q4 2010 Earnings Call January 27, 2011 5:00 PM ET

Operator

Good afternoon. My name is [Shanel] and I will be your conference operator today. At this time, I would like to welcome everyone to the Informatica Q4 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions). Thank you. I will now turn the conference over to Stephanie Wakefield, Vice President of Investor Relations.

Stephanie Wakefield

Good afternoon and thank you for joining us today. I'm here with Sohaib Abbasi our CEO and Earl Fry our CFO to discuss our fourth quarter and full-year 2010 results and to talk about our outlook for the business. I will read the Safe Harbor and then hand it over to Sohaib for his comments.

Some of the comments we will make today are forward-looking statements including statements concerning our projected financial results for future periods, our growth and operational strategies, our marketing growth opportunities, our product portfolio, customer adoption of and demand for our products and services, the use and expected benefits of our products and services by customers, the expected benefit from our partnerships and our expectations regarding future industry trends and macroeconomic development.

All forward-looking statements are based upon current expectations and beliefs. However, actual results could differ materially. There are many reasons why actual results may differ from our current expectations. These forward-looking statements should not be relied upon as representing our views as of any subsequent date and Informatica undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date that they are made.

Please refer to our recent SEC filings including the Form 10-Q for the quarter ended September 30th, 2010 for a detailed discussion of the risk factors that may affect our results. Copies of these documents may be obtained from the SEC or by contacting our Investor Relations department.

During this afternoon's discussion, we will be using GAAP and non-GAAP numbers. Our GAAP results and the reconciliation of the GAAP results to the non-GAAP results are attached in the earnings press release and are also available in the supplemental metrics section of our Informatica Investor Relations at website at www.informatica.com/investor.

Before I hand it over to Sohaib, I'd like to remind you that this call is being webcast and will also be available for replay on the website. I'd also like to ask you when we get to the question and answer period to please confine yourself to just one question. We will allow additional questions if time permits. Thank you.

Sohaib Abbasi

Thank you, Stephanie. I am delighted to report that that Informatica achieved two major milestones with our all-time record results in Q4 2010. For the first time, we attained quarterly license revenues over $100 million and annual total revenues over $650 million. Today, I will highlight the key accomplishments of the quarter and the full-year 2010. After Earl's presentation of our financial results, I will comment on our sustainable market opportunity to grow to $1 billion and beyond.

In Q4 of 2010, total revenue grew by 31% year-over-year to a new quarterly record of $198 million. License revenue grew by 40% year-over-year, to yet another record of $100.2 million. With non-GAAP operating margin of 30.7%, and non-GAAP EPS of $0.39, we achieved the most profitable quarter to-date.

For the full-year 2010, total revenues grew by 30% to $650 million and license revenue grew by 38% to $295 million. In other words, we obtained the highest revenue growth rate in a decade. I would like to recognize and thank the Informatica team for their remarkable contributions to attain our record results.

Over the past five years, we achieved a compound annual growth rate for software license revenue of 20%, and for operating income of 37%, despite the Great Recession. Our growth strategy and the team's operational discipline are driving record results in all economic times. As a reminder, our three-pronged growth strategy is to expand across all major geographic regions, advance our product leadership and grow beyond data warehousing.

The continually improving operational discipline is driving increasing contributions across all the geographic regions. Our relentless pace of innovation, complemented by strategic technology acquisitions has dramatically expanded our addressable market opportunity. By delivering differentiated business critical value beyond data warehousing, Informatica is now an even more strategic IT partner for our customers.

In 2010, we achieved record results in each major geographic region, including the Americas, EMEA, and Asia-Pacific. In the Americas, we benefited from our broadest ever product portfolio and the highest ever customer demand. We attained our best ever results with successes across multiple vertical segments, including important wins in financial services, life sciences, transportation and the public sector.

In Europe, we accelerated our growth momentum in the second half of the year, reflecting improved operational discipline and an improving macroeconomic environment. Our strong results in Central and Northern Europe include important customer wins in financial services, energy, life sciences, and transportation segments. And in Southern Europe, despite the uneven macroeconomic environment, we attained our internal targets.

In Asia-Pacific, with a combination of our broadest ever product portfolio and strengthened leadership team, we attained record quarterly and annual results. In 2010, we added 72 new customers in Asia-Pacific. With 351 new customers in 2010, we now have 4,282 customers around the world. With our international expansion more than 2,000 customers are outside of North America. To pursue the ever increasing customer demand globally, we continue to expand our operations and strengthen our team across all major geographic regions.

Our relentless pace of innovation, complemented by strategic technology acquisitions, continues to grow our product portfolio and expand our addressable market. Six years ago, the boundaries of the data integration market were limited to a single technology, ETL, to integrate on-premise data across multiple departmental database applications like ERP and CRM.

In 2005, our addressable market size was $11 billion as measured by IT spend on software and services of which about $1 billion was spent on software. Every year, we advance the frontiers of the data integration market for customers to leverage more data in more ways. To tackle the growing multi-facetted data fragmentation and delivery challenge ,we offer a comprehensive data infrastructure with five Best-in-Class technologies, enterprise data integration, cloud data integration, B2B data exchange, ultra messaging and information life cycle management.

To further unlock the business value of data, we deliver an information infrastructure featuring three Best-in-Class technologies, data quality, complex event processing and master data management. Today, with our broadest ever product portfolio, our addressable market is estimated to be $40 billion by 2013, as measured by IT spend on software and services, of which nearly $8 billion will be spent on software. Our expansive differentiated product portfolio is driving cross-sell opportunities across all the eight products.

As an example, a global leader in the travel industry, one of our top customers based on lifetime spend, increased their use of Informatica product portfolio with new investments in ILM and expanded investments in B2B data exchange, data integration and data quality. As another example, a top 10 Informatica customer, a global leader in life sciences, made a multi-million dollar investment in our new MDM products.

As these examples showcase, our growing product portfolio represents a significant incremental cross-sell opportunity with our base of over 4,280 successful customers, and beyond. In the core data integration and data quality categories, 36% of active customer projects have upgraded to the latest Informatica 9 release.

Allergan and EDS are among the customers that upgraded to utilize new Informatica 9 capabilities. We continue to benefit from the growing adoption of our expanded product line, including the newer products, B2B data exchange, application information life cycle management, complex event processing, master data management and ultra messaging.

In Q4, more than 32% of our transactions over $100,000 included these newer products. By delivering differentiated business critical value, beyond data warehousing, Informatica is now an even more strategic IT partner for our customers. As an example, GDF, the world's largest utility company selected Informatica MDM as part of their complete revamped of their IT system for the French national gas delivery pipe network.

The Informatica MDM based pipe master will handle authoritative information assets, related to the gas pipe network managed by GDF in France. As another example, a major European financial services leader selected Informatica ILM for an enterprise-wide application retirement initiative, to gain merger synergy, the firm will decommission 400 applications and archive two of parabytes of data.

The firm expects to expedite merger synergy of more than $1 billion, specifically reducing costs by hundreds of millions by 2012. As yet another example, ING, a leading European provider of financial banking and insurance products, selected Informatica ILM for an enterprise-wide data masking initiative to more efficiently remain compliant with current regulations on data privacy.

The firm will confiscate data used for test purposes from 8,000 sources including DB2, IDMS, DSAM, SAP, PeopleSoft, AS400, XML and other relational databases. With the growing strategic importance of cloud computing, Informatica is well-positioned to become an even more business critical IT partner for our customers. We advanced our pioneering leadership in cloud data integration with our best quarterly results and strengthening of partnerships.

In 2010, the number of organizations using Informatica cloud grew to 1300. One of our partners will promote Informatica to integrate their own cloud application services for divisional operations with on-premise application suites for corporate operations from vendors such as SAP and Oracle. The unified architecture of the Informatica cloud and Informatica platform will integrate the divisional data managed by the cloud service with the corporate data managed by the on-premise applications.

Finally, we continue to strengthen and expand our strategic partnership. A long-term partner, a global management consultancy firm, plans to offer a new multi-tenant cloud service for prescriptive and predictive analytic, built using Informatica insight. Clearly, with our broadest ever product portfolio, we have more opportunities than ever to partner.

To sum up, our record Q4 results yet again reaffirm our growth strategy and the team's exceptional operational discipline.

Now, I will turn it over to Earl to give you more details on our financial results after Earl's comments, I'll discuss our multi-year plan to exceed $1 billion in revenues.

Earl Fry

Thanks Sohaib. Our Q4 total revenues came in at an all time record $198 million up 31% on a year-over-year basis and meaningfully above our guidance range. License revenues were a record $100.2 million, up 40% year-over-year and 44% sequentially. Service revenues were another record, at $97.8 million, up 23% year-over-year. And up 7% sequentially.

Now, breaking down the components of services revenue, maintenance revenues were $70.6 million, up 20% year-over-year and up 8% sequentially while consulting, education and subscription revenues came in at $27.2 million up 34% year-over-year and up 6% sequentially.

Our deal metrics were strong across the Board. Existing customers contributed 88% of our license order of value, up from 87% in both the prior quarter and the fourth quarter of 2009. We did licensed business with 429 existing customers and added 82 new customers during the quarter. We booked a record 21 transactions over $1 million, up from 12 in the year-ago fourth quarter. And more significantly, we closed an all-time record 108 deals over $300,000, up from 95 in the year-ago fourth quarter and up from 73 in the third quarter.

Our average transaction size for orders over $100,000 came in at 489K. And the average transaction size for orders over $50,000 came in at 339K, both up from year-ago and prior quarter levels. 21% of our licensed orders came from the indirect channel and an additional 49% of our direct orders in Q4 were referred by partners or resellers. The overall total of indirect and referred orders was 70%, up from 64% recorded in both the last quarter and the year-ago quarter.

Licensed revenue from our direct business was 82% in Q4, and 18% of our license revenue came from the indirect channel in Q4. Moving to geographic mix. During Q4, we had particularly strong contribution from our international operations, and as a result North America orders as a percentage of total license orders were 57% compared to 59% a year ago, and 70% in the third quarter.

The mix of orders from EMEA and the rest of the world was 43%, up from 41% in the fourth quarter a year ago, and up 30% from the third quarter. North America revenue was 62% of total revenue in Q4, compared to 63% a year ago and 72% in the third quarter. Revenue from EMEA and the rest of the world was 38% of total revenue in Q4, up from 37% a year ago and 28% sequentially.

From a vertical industry perspective, financial services, healthcare, energy/utilities, and communications were our top four contributors to new license orders with contribution from the financial services sector at an all-time high.

Non-GAAP gross profit, which includes $3.5 million in amortization of acquired technology, and $0.7 million of stock compensation, came in at $170.3 million or 86% of revenue in Q4 relatively consistent with 86% a year ago and up from 84% in Q3.

License margins were 99% in Q4, slightly above 98% in both Q3 and the year-ago fourth quarter. Service margins driven by better than 95% maintenance renewal rates and our ever increasing installed base were 73%, relatively consistent with 73% in Q3 and 74% a year ago.

As a percentage of revenue, non-GAAP operating expenses were 55% of revenue for the fourth quarter, better than 58% last quarter and better than 56% in the year-ago quarter. As we stated many times, our goal is to strike a balance between investing for continued growth and driving measured improvement in our operating model. The Informatica team continues to execute on this balanced strategy and as a result Q4 revenue was up 31%, and Q4 non-GAAP operating income was up 38% from a year ago. Non-GAAP operating income as a percentage of revenue was 30.7%, up 141 basis points from a year ago.

Net interest and other income came in at roughly a half million dollar loss in the quarter, and our Q4 tax provision was 29% on both a GAAP and non-GAAP basis. Bottom line, Informatica delivered another record quarter with GAAP fully diluted EPS of $0.32, and non-GAAP fully diluted earnings per share of $0.39, which was $0.02 per share better than the high end of our guidance.

Based on Q4 orders, our potential future revenues disclosure which includes deferred revenue balances as well as orders not yet taken to revenue as of December 31st will be an all-time record $215.9 million, up $34 million sequentially and up $44.1 million compared to a year ago.

Total headcount was 2,126 at the end of Q4, an increase of 102 from the end of Q3. Sales and marketing headcount ended the quarter at 720, an increase of six. The headcount increase reflects increasing confidence in our business and continued investment to accelerate our development road map in key long-term growth areas.

Cash flow was very strong during the quarter. We ended the quarter with over $471 million in cash and investments, a $45 million increase from Q3, as we generated $44 million in cash flow from operations in Q4 compared to $28 million generated in Q3, and $29 million generated in the year-ago fourth quarter.

And during the fourth quarter, we did repurchase 300,000 shares of our stock for $13.1 million. DSOs were 68 days in Q4, up from 55 days in Q3, and relatively consistent with 67 days a year ago. And seasonally above our target DSO range of 55 to 65 days. Our DSOs do reflect the strong order volume experienced in the second half of the fourth quarter, as well as a higher mix of international business which typically has slightly slower cash collection cycles.

Our deferred revenue balance increased to a record $179.5 million, and is comprised of $172.5 million in current deferred, and $7 million in long-term deferred. Deferred revenues are up $35.4 million from a year ago, and up $20 million sequentially. We ended the quarter with 111.5 million shares outstanding on a fully diluted, if converted basis, an increase of 2 million shares during the fourth quarter.

The share count increase is a result of the strong increase in our share price over the past several months, and its impact on the Treasury stock method computation. This share count increase in effect reduces EPS by nearly $0.01 per share per quarter, while our quarter-to-quarter tax provision has some variability and will continue to be very sensitive to our quarterly geographic mix of earnings, we continue to expect our effective tax rate for the year 2011 to be no more than 30% on both a GAAP and non-GAAP basis before the impact of certain discrete tax items.

On a macro level, we continued to expect modest but uneven recovery in North America and EMEA, tempered by uncertainty in European public sector spending. However, we continue to see increasing evidence in our pipeline that data integration has become a high priority investment for our customers and prospects. Based on these indications as well as our internal indicators for the first quarter, we are setting a revenue target range of $160 million to $165 million, with non-GAAP EPS in a range of $0.24 to $0.26.

For the year 2011, while we remain cautious about the uneven nature of the recovery, we are confident in our prospects and will continue to have a dual focus, delivering strong revenue growth in 2011 and beyond, and measured improvement in operating margins.

We are increasing our target revenue for the year 2011 to a range of $735 million to $755 million, and despite the nearly $0.01 per share per quarter drag on earnings due the increased share count, we are nudging up non-GAAP earnings per share for the year to a range of $1.23 to $1.33.

Our non-GAAP EPS targets do not include the after-tax impact of an estimated $0.03 per share per quarter charge for the amortization of intangibles and acquired technologies, the facilities restructuring charge of roughly $0.5 per share per quarter. The tax affected impact of stock compensation of approximately $0.05 to $0.06 per share per quarter and any major acquisition costs and expenses.

One more note, regarding our convertible bonds. We currently expect to call the bonds in February, and expect holders to convert in March. As a reminder, the fully diluted share count already includes the converts on an if converted basis, so there will be no impact to fully diluted EPS and no change to our targets as a result of calling the bonds.

With that I'll turn it back over to Sohaib.

Sohaib Abbasi

Thanks, Earl. Our conviction in our multi-year plan to exceed $1 billion in revenue is higher than ever, particularly with the growing adoption of two new computing platforms, cloud computing and social computing. Cloud computing is driving the next wave of data fragmentation and social computing is fueling an explosive growth of data, a technology trend also known as big data.

The platform shift to cloud computing is driven by the compelling value proposition, lower cost and better results. These cloud computing vendors deliver the same resources to thousands of customers. Their economies of scale mean better economics for customers. Their specialization in one of three categories, infrastructure as a service, platform as a service, and software as a service means Best-in-Class results.

To realize this compelling value, organizations must overcome the associated challenge to retain control of their data in the cloud. Informatica's pioneering leadership and innovation in cloud data integration enables organizations to retain control over their data in the cloud.

Industry analysts estimate that the cloud computing market will grow from $60 billion today to $150 billion in four years. Despite this impressive growth, cloud computing will not replace on premise enterprise computing just as previous computing generations did not replace the legacy environments. Simply put, no one can afford to rip out the old on-premise computers and replace the old with the new cloud resources.

However, as with each new computing platform, the focus of innovation will shift to the new cloud platform and few can afford to be left behind. Informatica supports the hybrid IT platform giving the flexibility to integrate data from both on-premise and the cloud platforms.

In Q4, we further expanded our partnership with salesforce.com to support their new service, database.com and announced Informatica cloud enterprise addition, an offering designed for the hybrid IT environment. The increasing adoption of social computing by enterprises is driven by compelling value proposition. Go beyond traditional business management with relational database applications, specifically enable holistic brand management with social networking.

Relational database applications manage transactions. Social networking manages interactions. And the promise of social computing is for enterprises to gain a competitive advantage by being proactive with current social data rather than being reactive with past relational data.

Organizations gain an advantage with holistic brand management including proactive custom engagement and timely consumer sentiment analysis. As a result, social media is fast becoming a top priority for enterprises. The combined usage by enterprises of social networking services such as Twitter, Facebook, and blogging is doubling every year, resulting in the recent unprecedented explosion of data.

Growth of relational data is warped by the explosive growth of social data. The technology trend called big data requires big changes in the technology stack. Over the past 40 years the relational technology stack was optimized for managing structured transactional data. A new stack is now available for managing large volumes of data including unstructured interaction data.

This new stack is called Hadoop. But unlike serial processing of relational databases, Hadoop supports parallel processing of multiple types of data and for large volumes of social data only parallel processing delivers acceptable performance.

In Q4, we announced a partnership with Cloudera, a leading provider of the open source Hadoop technology. In 2011, Informatica will combine relational data for transactions with social data for interactions. And the growing volumes of social interaction data will fuel further demand for the Informatica platform.

To sum up, with the increasingly critical role of our expansive product portfolio for three computing platforms, existing on-premise computing and emerging cloud computing and social computing, Informatica is in the strongest ever position for our long-term growth to $1 billion beyond.

So with that, I will open it up for your questions. As Stephanie said earlier, we would appreciate it if you confine yourselves to one question. Thank you.

Operator, may we have the first question?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question is from the line of Tom Roderick with Stifel Nicolaus.

Tom Roderick - Stifel Nicolaus

Hi guys, good afternoon. Just a question here around the product cycle, as we think about going into 2011, which would seem to be maybe more of a product cross-sell type of year. You had MDM and data quality sell very well to your customer base even before you got into the teeth of the product cycle. So, now that you've got 36% of your customers on Informatica 9, how should we think about which products will do best into the coming year, any one or two products you would highlight as being incrementally positive or at an infection point?

Sohaib Abbasi

I expect that we will continue to see very strong results from MDM and ILM. But I also believe that we will benefit from the Informatica 9 upgrade cycle in 2011 and beyond. We plan to deliver 9.1 in March and that in turn will attract more customers to upgrade to Informatica 9. Thanks very much, Tom.

Tom Roderick - Stifel Nicolaus

Thanks.

Operator

Your next question is from the line of [Michael Tirith] with Raymond James.

Michael Tirith - Raymond James

Hi guys. Any update on the partnerships with either salesforce.com or Dun & Bradstreet? Is that leading to any additional kind of work for you guys?

Sohaib Abbasi

We are making tremendous progress, both in the partnership with salesforce.com and with Dun & Bradstreet. We announced support for their new database.com service and we have engaged in discussions around that as well as several other initiatives. We're doing very well. We have as I mentioned earlier 1300 companies that are now using Informatica to integrate salesforce.com data with on-premise data. We are very pleased with the results we have attained with Dun & Bradstreet's new data as a service called DNB360. That is generating even greater interest among our partners to leverage a lot of what we've done with Informatica cloud. We have an initiative to attract more partners and we expect to be announcing new partnerships in the coming quarters. Thanks very much.

Michael Tirith - Raymond James

Thanks Sohaib.

Operator

Your next question is from the line of Mitesh Dhruv with Bank of America.

Mitesh Dhruv - Bank of America

Thank you so much for taking my question. Just one question for you is that we obviously saw a very strong quarter and also the number of repeat customers was probably the highest in history. So I was wondering if you can comment on just 4Q environment, did you see any budget flush or any deals that could potentially were to happen in Q1 that got sort of pulled into Q4.

Earl Fry

Yeah, Q4 was obviously very strong and I guess I would characterize it as it was seasonally strong. We continued to build pipeline. Our close rates were good. That said, I don't think we came anywhere near to kind of training pipelines. So, I think, we're in sitting in pretty good shape and did have very strong quarter. I think what we're starting to see in a number of verticals, particularly financial services, which was notably strong, is you have more percentage of firms there feeling like we're on the way to recovery. So, I think the spending environment, particularly for those, will continue to be good going forward.

Mitesh Dhruv - Bank of America

If I could just quickly get your rational on calling the convert. That's it from me.

Sohaib Abbasi

So, just it's a $1.5 million in cash that we're paying out every quarter and it's trading like equity so we might as well call it what it is, which is equity.

Operator

Your next question is from the line of Michael Nemeroff with Wedbush Morgan Securities.

Michael Nemeroff - Wedbush Morgan Securities

Hi, guys. Congrats. Thanks for taking my questions and congrats to the IR team and Earl for their recognitions this quarter. Well deserved. So, could you just talk about the ultra messaging product, one of the newer products and traditionally it's been focused more on the financial services aspect. Could you tell us were there any deals in the quarter that were non-financial services or any in the pipeline and then I've got one for Earl, please.

Sohaib Abbasi

With the ultra messaging, as you know we've had very good success in financial services and in particular in capital markets. And we continue to win important decisions in financial services. We are building a pipeline beyond financial services, but the success to date has been primarily with the wins we've had in financial services.

Michael Nemeroff - Wedbush Morgan Securities

And then Earl, given the strength in the license this quarter I'm assuming that a lot of it was organic. Can you just tell us what the that organic growth rate, I'm assuming it's a real good number, you'd probably like to share that.

Earl Fry

Yes, again, we kind of don't look at the business that way, but when we're doing acquisitions obviously we're looking at adjacencies and things that we can accelerate our road map on. That said, anticipating the question, barely a third or less than a third of our growth came from product areas that we acquired in the last 12 months. So, we had very healthy double-digit growth year-over-year in products that we had for more than a year.

Michael Nemeroff - Wedbush Morgan Securities

Thanks, guys.

Operator

Your next question is from the line of Mark Murphy with Piper Jaffray.

Mark Murphy - Piper Jaffray

Yeah, thank you, Earl. When you look at 2010 as a whole, did your financial services business grow faster or slower or in line with the rest of the business? And I'm curious, as you look at the pipeline for 2011, how do you think that will shake out? And I have a quick follow-up?

Earl Fry

Yeah, financial services did grow faster than the overall business for all of 2010. I'm not sure that it stayed at that same percentage mix going forward. It might. But we had a very strong Q4 in financial services. It was roughly a third, quite frankly, of our business in Q4. And again, I think the way to think about it is those are the firms where spending was contained the most during the recession and they're needing to invest in new areas. They're needing to invest because of response to increased regulatory pressure as well as trying to deal with a new macro environment.

So, I do think we'll start to see some of that uplift in other verticals as the recovery starts to broaden over the next year or two. But again, financial services was a good leading indicator, I guess.

Mark Murphy - Piper Jaffray

Okay. And then, just as a follow-up for Sohaib, when you think about moving into this new area of social computing and just to the extent that is another initiative toward unstructured data, I'm wondering when you kind of reflect on the acquisition of ItemField back in 2006, any insights on maybe what you learned, what went right and maybe what went wrong with the ItemField acquisition.

Sohaib Abbasi

Distinctly different opportunities. With ItemField, we were focused on how do we share data between trading partners as one of the used case, and of course the other one was unstructured data within the enterprise. With social networking, many of our customers are beginning to take a look at the data being collected at social networking websites including Linkdin as well as Facebook and Twitter and using it for consumer sentiment analysis. So, for us it's a new source of data and what we have learned through our experience is that we will expand our entire product portfolio to support new types of data. So, in other words, social networking is a trend that will benefit the entire platform.

Our customers are looking for our MDM offering to support data coming in from social networking. Of course, cloud data integration customers are as well. So, we're making the investments with Hadoop and other related technologies to ensure that our platform supports social networking as yet one more source of data.

Mark Murphy - Piper Jaffray

Thank you.

Operator

Your next question is from the line of Edward Maguire with CLSA.

Edward Maguire - CLSA

Yes, good afternoon, everyone. I was wondering, if you could just talk about some of the larger deal dynamics, whether those are being driven by multi-product pull through from the core power center platform or conversely, where you might have MDM driven deals that are turning into much larger transactions. That's all from me. Thank you.

Sohaib Abbasi

Well, we clearly are benefiting from having the broadest ever product portfolio and most of the large deals involve multiple products. The ones that are focused on one particular product, the range from primarily using our core data integration platform to other customers that are looking at the MDM product. Among the largest deals for the quarter are transactions that have primarily focused on ILM. So, we are benefiting from having the broadest ever product portfolio. We're clearly also benefiting from many of the trends that Earl commented in financial services, focus on regulatory compliance, greater volumes of data. But again, we're positioning the Informatica platform in most of those larger transactions. Thanks Ed.

Edward Maguire - CLSA

Thank you so much.

Operator

Your next question is from Nabil Elsheshai with Pacific Crest Securities.

Nabil Elsheshai - Pacific Crest Securities

Hi, guys. Thanks for taking my question. Just wanted to follow-up on the version 9 upgrades from the question earlier, when you look at that percentage of customers that have moved the core power center product up to version 9, have you seen a change in attach rates particularly for data quality versus the attach rates that you were getting on the version 8 product?

Sohaib Abbasi

Nabil, as you know, we commented in the earlier calls. There are two metrics that we use for the impact of Power Center 9. One of course is what percentage of the active power center projects have upgraded to the new version. And the other one is the broader platform adoption. In terms of the deals over $300,000, and data quality and MDM have enough synergy that almost half of the deals that are over $300,000 include data quality products. So, the impact of Informatica 9 clearly is helping us position not just data quality but also MDM.

In fact, last quarter, we delivered MDM on the Informatica 9 platform, which allows our customers that have written data quality rules in the hub to ensure that those same data quality rules could apply to the data before it gets to the hub. So, having that synergy between MDM and our Informatica 9 platform is clearly generating a lot of new business, new license deals for us.

Earl Fry

Maybe one other thing, Nabil. I think while I do believe kind of the data quality attach rate on Informatica 9 that opportunity is still ahead of us this year and next year. The place where we've seen earlier up tick and maybe we didn't quite anticipate it as much is really in the number of installed base customers that are adding options, core power center options and they're adding capacity, they're adding CPU. So, that's kind of the first place that we're seeing uplift from the Informatica 9 conversion.

Nabil Elsheshai - Pacific Crest Securities

Okay, that's helpful. And then, just on federation, I know that's maybe a little less mature area in the add-ons. Where are we on that and is that a 2011 thing or do you think it will be a little bit longer-term?

Sohaib Abbasi

We actually were very pleased with the results that we attained with specifically, I mean, the feature that we call it install based services which provides data federation. We attained the internal targets that we set for ourselves and the pipeline looks very strong. We've had that wins that we've talked about in the past where customers are using installed based data services in order to provide access to data without physically moving that data and that capability has resulted in a lot of great opportunities for us. And the pipeline looks strong.

Nabil Elsheshai - Pacific Crest Securities

Thank you guys for taking my questions.

Operator

Your next question is from Derrick Wood with SIG Susquehanna.

Derrick Wood - SIG Susquehanna

Thanks, guys. Thanks for taking my question. You got some positive comments on deal flow in ILM here. Is this coming from the direct sales force or are you getting much greater leverage from AMC. And just a quick follow-up, any comments you would have on areas of acquisitions you would look at in 2011. Thanks.

Sohaib Abbasi

Success we've had with ILM has been primarily through our own field organization. Of course, working with our traditional partners. There are two areas where we've had great success with ILM. One is application retirement and I cited one example where it was a merger synergy where they were decommissioning 400 applications and there are many such examples where customers are retiring applications and yet for a variety of reasons need to have access to the archive data.

The other area that has generated a lot of interest is data privacy, specifically for test data management and again, I cited ING as a customer that is now using Informatica to mask data in 8,000 different sources. Both of those have generated a lot of demand. We've had some initial success with EMC. But I expect that we will benefit from that partnership in 2011 and beyond.

Derrick Wood - SIG Susquehanna

Okay. Just on the thoughts around acquisitions for this year?

Sohaib Abbasi

As you know, Derrick, I mean, we've been singularly focused with our mission to advance Informatica as the leader in data integration and our acquisitions have reflected that that we expanded our product portfolio in two dimensions more the data-centric technologies that as data part in MDM and more integration-centric technologies including ILM and Ultra Messaging. The social will remain the same and again, we will continue to remain singularly focused.

Derrick Wood - SIG Susquehanna

Thank you.

Operator

Your next question is from Frank Sparacino with First Analysis Corporation.

Frank Sparacino - First Analysis Corporation

Hi, guys. I was just wondering, if you could comment on any meaningful changes with respect to the sales force in 2011, particularly as it relates to quotas or any other item. Thanks.

Sohaib Abbasi

Let me give you my perspective and I'll have Earl comment on it as well. With our broadest ever product portfolio, we have been gradually taking steps in order to refine our sales organization, with a focus on the largest customers to be able to penetrate those accounts deeper with the broadest product portfolio. To complement that, we've been developing a partner strategy, a channel strategy for us to ensure that we can broaden the reach of that.

Now, in addition to that, as was probably evident in some of the numbers that we reported, was that we have seen an increase in productivity, sales productivity in several of our more mature market segments. And I expect that we will benefit from both the refinement in our sales organization as well as increased sales productivity.

Earl Fry

Yeah, just maybe a little more color. So, we continue the evolution, I guess, moving away from primarily a territory based sales organization to one that is named account or strategic account focused. And as a result of growing the product portfolio you would expect that as a result of that and focusing on bigger accounts, going deeper and broader in those accounts, that there would also be some on average some modest amount of quota increase as well.

Operator

Your next question is from Bradley Whitt with Gleacher & Company.

Brian Wallins - Gleacher & Company

Hi, this is Brian Wallens for Brad Whitt. Congratulations on the quarter. You've touched on this a little bit. We're at the one-year anniversary of Siperian. And I was wondering if you could provide any color on progress you've made in MDM over the past year, how you see the sales cycles taking shape and the growth opportunity you see for it over the next couple of years. Thanks.

Sohaib Abbasi

We have been very pleased with the results we've attained with MDM. But to provide you with a broader context, Informatica has been selling our technology for MDM projects for a very long time. And in fact, Informatica's identity resolution was already embedded as part of Siperian. So, it's not that surprising that we were very well prepared when we expanded our MDM offering with Siperian. We've had great success, particularly with the initiatives that our customers had for business revival where they're looking at customers' centricity initiatives. We've had great success in financial services, we've had great success in retail as well. And we've had a great deal of success in some other verticals where the focus has not been so much on revenue enhancement but rather regulatory compliance or other considerations including life sciences. So, great success across multiple vertical industries and we will continue to promote customer centricity technology and would not be just limited to MDM but rather it would be positioning our entire platform.

Earl Fry

That's an area, I guess, maybe further that we continue to see very high priority investment opportunities to further broaden our footprint in MDM over the next few years.

Operator

Your next question is from the line of Brad Sills with Barclays Capital.

Brad Sills - Barclays Capital

Hi, guys, congratulations on a good quarter. Just a question on data quality. Obviously that's a big driver of the deal sizes. Can you just comment a little bit on how that's doing in new deals versus upgrades, please.

Sohaib Abbasi

Data quality is doing well. We've had a good success in positioning data quality as part of Informatica 9 that I talked about earlier. We have had very good success with some new customers that are using certain capabilities within our data quality offering. We recently announced a new product called MDM registry which is built using the identity resolution technology and we had a very impressive win at financial services leader that is now using that as the key technology for some of their MDM products. So again, very good success both attaching it with our broader platform and great success in some of the newer initiatives.

Earl Fry

Maybe one other kind of metric to throw out. If our $21 million deals, 12 of those have data quality as part of it. Three of those 21 top million dollar transactions were with new customers and two of those three new customers purchased data quality.

Brad Sills - Barclays Capital

That's helpful. Thanks, guys.

Operator

Your final question is a follow-up from Michael Nemeroff with Wedbush Morgan Securities.

Michael Nemeroff - Wedbush Morgan Securities

My question's been answered. Thank you.

Operator

At this time there are no further questions.

Sohaib Abbasi

In closing, for 2011 our singular mission remains the same, advance Informatica as the clear leader in data integration. With the increasingly critical role of our expansive product portfolio for both the existing and emerging computing platforms, Informatica is in the strongest ever position to grow to $1 billion and beyond. Thank you.

Operator

Thank you for joining today's conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Informatica Corporation CEO Discusses Q4 2010 Results - Earnings Call Transcript
This Transcript
All Transcripts