Netezza, Seeking $100M in IPO, Builds “Superior” Data Warehousing Gadgets

7/18/07Follow @wroush

[UPDATE Thursday 7/19/07: Trading of Netezza (NZ) shares opened today at $12 per share, slightly higher than the company's original target price, and had risen to $16.85 by 2:00 pm EDT. -eds.]

It’s a big day for Framingham-based Netezza, which makes uber-data devices used by large enterprises like Amazon and Nieman Marcus to combine storage, server, and database functions in a single system. The seven-year-old company hopes to raise about $100 million in an IPO scheduled for today.

It goes without saying that enterprises need faster, better, cheaper ways to store, manage, and manipulate large amounts of data about their products and customers—just look at the hours- to days-long waits suffered by hundreds of thousands of new Apple customers as they tried to get AT&T to activate their new Apple iPhones. Netezza (Urdu for “results”) speeds up data handling by placing software for parsing and filtering data on the same machines with disk drives, eliminating the need to haul data back and forth between storage systems and offboard CPUs. Amazon, for example, replaced an Oracle database that it was using to analyze 25 terabytes of “clickstream” data, records of customers’ travels through its website, with a Netezza system that ran up to 37 times as fast.

Sun, IBM, EMC, NCR’s Teradata subsidiary, and other companies are competing in this niche—which might loosely be described as “business intelligence mining”—but Netezza’s platform is “superior,” according to Todd Dagres, general partner at Boston-based technology investment fund Spark Capital. (Dagres is a former general partner at Battery Ventures, one of Netezza’s backers, but he is not bound by the “quiet period” rules affecting what company insiders can say to the press around IPO time.) “Teradata is their biggest competitor, and I think they’ll have a pretty easy time competing against them,” Dagres says. “They make a niche product, but it’s a fairly large niche, and if they can get 25 to 30 percent of that market they will be a pretty profitable company.”

Future tense is appropriate, though, given that the company been operating at a loss since its founding in September, 2000. But those losses are narrowing; in the quarter ending April 30, Netezza earned $25.3 million, had gross profits of $15.3 million and suffered an operating loss of only $1.6 million. “I hope that their going public is a sign that they feel that earnings are predictable,” says Dagres. “They have a very aggressive team there [the company's CEO and co-founder is Jitendra Saxena, veteran of successful business-analytics provider Applix] and they have a fairly significant advantage over the companies that are already out there in the market.”

Netezza will trade on the NYSE Arca exchange under the ticker symbol NZ.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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