A big stock decline in February signaled some major growing pains for the Seattle data-analytics company, including heightened competition and some sales-force challenges.
Years of breakneck growth made Tableau Software a darling of the technology sector and one of Seattle’s fastest-growing employers. But if the hangover of the past six months is any indication, Tableau has some work to do.
Growth at the Seattle-based company, which makes software used to analyze information and make sense of it with visual tools, is slowing as competitors like Microsoft take aim at the market for next-generation data tools. Meanwhile, there are signs that demand for such software may be going through a weak patch.
Analysts and investors will get a look at how Tableau is handling its growing pains when the company discloses its quarterly financial report Tuesday. Analysts expect the company to post revenue of $193.8 million during the three months ending June 30, up 29 percent from the previous year. That would be the smallest quarterly growth in Tableau’s three years as a publicly traded company.
And Tableau shocked the market in February when its stock dropped 50 percent in a day, even though its financial results met major earnings benchmarks analysts were expecting. Investors were concerned about a slowdown in Tableau’s license revenue metrics, a number that suggested that customers weren’t paying to expand their use of Tableau products as quickly as they once were.
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The stock has since recovered from its $37.22 low in February, but it’s still about 30 percent lower today than the $81.75 it recorded before the drop.
Analysts surveyed by Thomson Reuters expect the company on Tuesday to post an adjusted profit of 5 cents a share, down from 7 cents a share a year earlier. That metric strips out stock-based employee compensation, which is among the biggest expenses at Tableau.
Its technology allows business users to drag-and-drop data sets into a system that makes sense of a massive number of information points. Tableau quickly sorts the data into charts, graphs and pictures. The company also makes products for consumers, schools and media.
The company has attributed much of its slowing growth to a sales team that grew so quickly it couldn’t get its feet on solid ground fast enough. At least one analyst agrees, and that Tableau will find its way back.
But Tableau has another concern. Its neighbor across Lake Washington, Microsoft, released Power B.I., a data-analytics tool, last July, and the Redmond software giant’s low price and familiarity with customers are proving a hurdle for Tableau’s once sprinting growth.
“The spigot got turned off,” said Srini Nandury, founder and managing director at Summit Redstone Partners. “It’s a trickle now. They have to fight for every single drop.”
That’s especially true when you’re competing against Microsoft, a company that already has a strong standing in the enterprise world and can appeal to companies that want all their technology tools on one platform.
Tableau declined to comment for the story, citing a quiet period before their earnings report.
A couple of years ago, Mod Pizza would have been a prime Tableau customer.
The Bellevue-based restaurant chain started out tracking its sales with Excel spreadsheets, updated manually and emailed to employees each morning. That was fine when the company had just a few outlets but was becoming an arduous task as Mod surged past 100 locations.
Peter Welling, Mod’s business intelligence chief, started looking for software to help out. Tableau was a contender, he said, but the high upfront cost — $1,000 per user in some cases, according to a Deutsche Bank report — was a roadblock. So was developing a relationship with a new software seller.
Instead, Mod last summer turned to a company it already did business with: Microsoft and its Power B.I. (short for business intelligence) analytics tool. Power B.I., according to Deutsche Bank, can cost as little as $9.99 per user per month, a hard figure to beat.
Microsoft, as part of a broader push to make smarter workplace software, has made B.I. a priority, and told prospective customers, such as Mod, where it hoped to take the product.
“I knew Microsoft was going to put time and resources into B.I.,” Welling said.
Mod Pizza has plenty of company in jumping on the Power B.I. bandwagon.
At an industry event earlier this year, Microsoft said it had sold Power B.I. to 90,000 organizations — or more than twice Tableau’s entire customer base, according to Deutsche Bank. That growth, analysts with the investment bank said, came before Microsoft starting putting its massive sales force into action to promote Power B.I.
Tableau also has a smaller but still impressive sales force, one that has been rapidly growing for years. That is, until this spring, when Tableau said it would slow growth to give employees time to get fully trained.
Green sales workers were part of the reason for slowing numbers, Tableau executives said in April.
“At the end of Q1, less than 60 percent of our sales reps were fully ramped,” CEO Christian Chabot said on a conference call with executives while discussing first-quarter results in April. “We’re seeing an uptick in average tenure as our recently hired sales reps become more ramped, and we are enthused about the contribution those hires will make this year.”
Sales chief leaving
Tableau has yet to name a replacement for longtime sales chief Kelly Wright, who announced she would retire at the end of the year. The company also lost commercial-sales leader Scott Jones this spring when he jumped to SAP.
Tableau has internal sales-execution problems to fix, UBS analyst Brent Thill said. And yes, Microsoft is daunting. But Tableau has a product that sets itself apart, he said.
“I think they went through a growing pain around their enterprise adoption,” Thill said. “I don’t believe that this is a technical issue.”
The quality of Tableau’s product is the biggest thing the company has going for it. Many analysts and users agree that Tableau’s software is excellent. Better, in most cases, than its competitors’. Companies are eagerly awaiting the launch of the newest version, Tableau 10, which includes updates aimed at enterprise customers.
Power B.I. will work well for companies that work mostly on a Microsoft platform, but Tableau has the advantage of integrating with many different data sources and can process “heavier” solutions. Microsoft has likely stalled some potential deals for Tableau, Thill said, but competition is not its main issue.
That would be internal sales challenges, something Thill is optimistic Tableau can work out.
“If you’re a software company, you’d rather have to fix your sales problems than your technology problems,” he said.
At a potential Seattle customer, the Marination Station restaurant operation, Tableau is dealing with both.
Marination uses Tableau’s free tablet app, Vizable, and is considering purchasing a desktop license. But Marination’s point-of-sale system doesn’t communicate well with Tableau’s tools.
Marination is working with Tableau to see if the technologies can be integrated, and co-owner Roz Edison said she is optimistic it will work out.
“We are looking at a couple other options but would rather go through every possible platform to make Tableau work,” she said.
Fremont-based Tableau announced plans for a large expansion in Kirkland, where it will anchor an under-construction office tower in the upcoming Kirkland Urban development.