Teradata Sells Its Marketing Applications Business for $90 Million

Teradata announced on Friday that it had signed a deal to sell its marketing applications business for $90 million to private investment firm Marlin Equity Partners. The company had announced plans to sell the business last November. The sale involves the former Aprimo, eCircle, FLXone data management platform, real-time interaction manager, and other cloud-based marketing products. Teradata will retain its on-premise Customer Interaction Manager (CIM) and an on-premise version of Real Time Interaction Manager (RTIM).

The price is much lower than usual for cloud-based marketing systems. Teradata reported just under $200 million revenue for marketing applications last year. This includes about $40 million for the pieces that Teradata is keeping. So the $90 million price is about 0.56x revenue ($90/$160). This compares with Marketo stock selling at roughly 5x revenue ($1 billion market cap on $200 million revenue). It’s true that Teradata lost $45 million on the marketing applications business last year, but that’s still less on a percentage basis than Marketo’s loss of $71 million. The differential suggests that buyers saw little potential for growth in the businesses that Teradata is selling. The low price may also reflect a departure of many human assets from the Teradata business in recent years.  Teradata itself paid $540 million for Aprimo back in 2011, again roughly 5x revenue. 

It’s not surprising that the buyer is a private equity firm. That was what had been rumored. Marlin hasn’t had much previous involvement in marketing applications but it did buy email provider Blue Hornet in December. Presumably it will combine the two businesses, reduce the losses, and try to sell the result either to other businesses or on the stock market. I don’t understand why Marlin thinks the combined firms would be much more attractive than the separate businesses but presumably they feel there is greater growth potential for a better-managed business. Or, Marlin may plan to split up its acquisitions and sell individual components such as marketing resource management and data management platform separately.

In a move that borders on surreal, Teradata's Marketing Application division itself today announced the latest release of its integrated marketing cloud.  I suppose this signals the hopes within the marketing applications team to remain intact.  Whether that's more than wishful thinking, only time will tell.

I’d like to say I was clever in predicting that Teradata will hold onto CIM and RTIM, but this was something the company announced just after it said it was selling the marketing applications group. CIM and RTIM both started as separate products from Aprimo and, for the most part, remained technically distinct.  My understanding is they held onto the on-premise pieces because they were important to major Teradata clients, whereas the businesses being sold were used by smaller companies who were not buying much else from Teradata.

The very low price certainly isn’t good news for other SaaS marketing vendors, but I think it’s more about the unique situation of the Teradata products than the industry in general. So I’d expect valuations of other cloud-based marketing firms to be largely unaffected.