Gartner Q1 FY08 Earnings – No decrease in research growth

logo-gartner.gifThis analysis does not look at areas of interest to investors, but seeks to pull out insights that are relevant to clients and prospects as well as communications and IT vendor analyst relations (AR) teams.

Press release summary: Gartner, Inc. (NYSE: IT) reported results for first quarter 2008. Contract value, a key leading indicator for Gartner’s Research segment, increased 17% year-over-year to a record level of $778.4 million, reflecting the successful execution of the Company’s strategy to accelerate the growth of its Research business. Total revenue for first quarter 2008 grew 10% year-over-year to $290.1 million, principally driven by strong, double-digit growth in the Company’s Research segment. Excluding the impact of foreign exchange, research contract value and total revenue increased 13% and 5%, respectively. (Revenue and earnings both beat Wall Street analyst consensus.) Client and wallet retention rates for first quarter 2008 were 82% and 100%. The full earnings press release can be found here.

Notes from the conference call:

  • As always, a call that was consistent with previous quarterly calls. Under promise and over deliver.
  • No change in strategy, however belt tightening across the board due to economic uncertainty
  • 5th straight quarter of research contract value (CV) increase in high teens
  • Strong growth in CV from enterprise IT clients
  • Some vendors more “thoughtful” about conference sponsorships
  • 2/3rd of CV growth due to new clients, not just price increases
  • 30 net new sales reps added in Q1, but slowdown in hiring until economy gets clearer
  • All regions and industries saw double digit growth
  • As always, price increases coming for legacy as well as new products
  • M&A an important strategic consideration, otherwise would not have a dedicated business development team

Implications for clients, whether end users or vendors, and analyst relations (AR) teams:

  • Gartner Sales will try to upsell clients to a “Leaders” product. Not necessarily bad even though the price is significantly higher, if the “Leaders” product delivers more business value.
  • Vendors should consider increasing sponsorship of targeted Gartner events. If other vendors, especially competitors, are cutting back, then there is less clutter on the show floor. Vendors might be able to lock in some bargain pricing.
  • No indication from financial performance that Gartner influence with end users is waning. AR teams should use this observation with executives. “Effective AR Drives Sales!” now more than ever because IT managers look to advisory analysts during times of economic uncertainty.

Bottom Line: Gartner continues to execute well, even during a time of economic uncertainty in the US economy. While managing expenses tightly, there is no indication that Gartner is considering job cuts that could negatively impact research creation or client service. Vendors should take away that Gartner’s advice is still valued by IT decision makers which means that increasing AR investment now can have a tangible ROI in terms of increased leads and revenue.

Question: Clients – It was mentioned that there has been no pushback on pricing increase, do you feel that pricing is fair and delivers business value? Vendors – Have your sales reps seen an increase or decrease in the number of deals where Gartner analysts are playing an advisory role? Enterprise IT managers – Are you using Gartner more or less when it comes to product and vendor selection?

Do you wonder about the trends in the industry analyst market and the implications for your company? SageCircle can help – SageCircle constantly tracks the changes in the analyst market and analyzes what the implications are for enterprise IT managers and vendors alike. Contact us at 650-274-8309 or info [at] sagecircle dot com for how we can help you succeed in a volatile analyst landscape.

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