NCR and Teradata: On My Own
Self-service technologies provider NCR and data warehousing and analytics specialist Teradata (a division of NCR) are getting facelifts: NCR revealed on Monday that it intends to spin off all of its Teradata data warehousing division to NCR common stock shareholders, essentially splitting NCR into two independently, publicly traded companies. After the proposed spinoff (expected to take between six months and nine months to complete) Bill Nuti, president and CEO of NCR will retain both posts. Mike Koehler, currently senior vice president of the Teradata division, will take the helm as the new-look Teradata's president and CEO.
The move, which is expected to be a tax-free transaction to NCR and its shareholders, is subject to certain conditions, including final approval by NCR's board of directors, but approval by its shareholders isn't required. NCR has tapped JP Morgan as its financial advisor.
NCR expects the soon-to-be independent companies to better focus on their customer base, business strategy, and operational needs. NCR provides self-service solutions like ATMs, retail self-checkout systems, automated bill payment systems, and airline, hotel, and hospital self-check-in/out kiosks, and will continue to focus on these services once the spin off is complete. Its other areas of focus include retail point-of-sale technologies, customer-support services, business consumables, and check processing and imaging solutions.
magazine's 2006 Market Awards One To Watch recipient in both marketing automation and analytics--provides solutions that cater to areas such as enterprise data warehousing, master data management, customer management, finance and performance management, profitability analytics, and demand and supply chain management. Teradata pulled in $1.5 billion in revenues and operating income (excluding pension expense) of $309 million in 2005, according to NCR.
"NCR and Teradata are each major and attractive businesses, but they operate in different markets with markedly different business models," Nuti said during a conference call on Monday. "The separation of Teradata from NCR will create two independent companies that are both market leaders, each focused on their separate businesses, customers, and strategic initiatives. They will have the ability to more effectively pursue their specific growth and R&D agendas with much greater management focus, and investing in their independent [companies] without having to balance the investment needs of the other."
TowerGroup, an advisory research and consulting firm specializing in the financial services industry, believes that the proposed spinoff of Teradata is a positive event for both NCR and Teradata given the significant differences in the two organizations' business models, sales efforts, and corporate branding, according to Kathleen Khirallah, research director of the Retail Banking practice at TowerGroup. "Teradata has experienced healthy growth in the past few years in terms of both revenue and operating income, providing NCR with a unique opportunity to spin off a strong, growing player in the software market at a favorable time," Khirallah said in a written statement. "The proposed split should have little impact on financial institutions that use NCR for their ATM/self service kiosks and Teradata for their data warehousing capabilities. Although CIOs and CTOs who are looking to minimize vendor relationships will have an additional supplier to manage, the two business units have historically sold their products and services into different parts of the institution, and contract leverage was limited."
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