The research and development partnership between NCR Corp. and Fujitsu Ltd. will likely be a delicate balancing act between a desire to collaborate in certain areas and a need to keep proprietary interests safe, executives from both companies said.
The deal, which was announced last week and a year in the making, looks like yet another sign of the times for automated teller machine manufacturers, which face near-saturation in the U.S. market but plenty of opportunity abroad.
Given the various strengths of different companies in the ATM industry, it makes sense that some would want to form relationships, though the collaborative process to be used in the NCR/Fujitsu partnership could prove hard to pull off.
The two companies say they will work together on technology and product supply in addition to research, but they plan to remain competitors in the distribution, sale, and servicing of ATMs in the markets where they both have a presence.
NCR, the worlds largest ATM manufacturer, is based in Dayton, Ohio. Fujitsu, of Tokyo, is a much bigger company, but with a core focus on Internet technology and a relatively small ATM operation.
Executives from both companies said the partnership is not a prelude to a merger of the two companies, or the sale of Fujitsus ATM business to NCR.
Bob Tramontano, the vice president of global marketing and solution realization for NCR, said his company had been seeking to collaborate with a major player for some time before its executives met with their counterparts at Fujitsu.
Teaming up with a Japanese competitor will bring together people from diverse cultures with different points of view, and it will help both companies look at a problem and think of a solution in a fresh and interesting way, he said.
The aim is not only to come up with new ideas, but to get those ideas to market more quickly, Mr. Tramontano said. First on the partnerships agenda is developing ATM modules and components, he said. Were looking at walking before running.
And even though neither side will share every idea it has, both companies are encouraging their engineers to be especially open-minded about sharing ideas with one another, Mr. Tramontano said.
He acknowledged that collaborating with a rival especially one that, like NCR, holds a number of patents will be difficult.
Whenever you get new parties to a table, theres always trepidation of what to share, Mr. Tramontano said. There was more value to sharing than not. Both companies have huge patent portfolios. Obviously there will be some of the portfolio we will not share.
The companies will jointly own the intellectual property produced directly by the collaborating teams.
One item the companies hope to develop is a bill recycler, which would let an ATM accept cash, screen the bills for counterfeits, sort them into denominations, and prepare them for reuse as withdrawals. Such a device would reduce the need to service a machine when it runs out of money.
Bill recyclers are common in Japanese ATMs, and NCR has its own version, but several sources said Fujitsus is better.
Fujitsu covets NCRs check imaging technology, which can truncate a check at the ATM and send the image over the Internet for processing.
Tom Juliano, the senior vice president marketing for Fujitsu Transaction Solutions Inc. in La Jolla, Calif., said that these types of collaborations have gone on for years in industries as diverse as automobiles and computers, but the ATM world has not seen anything like it, because most systems were built with non-interchangeable parts.
Now, because many newer ATM models use the Microsoft Windows platform, the software and peripheral hardware for these machines, such as bill-recycler components, can be produced by other companies, he said.
We want to compete, and we want to be No. 1 we all have the same goal, Mr. Juliano said. But we really have to focus on our customers, and what our customers want is to select the best-of-breed hardware at the lowest price.
The collaboration could help both companies cut costs and help in their negotiations with suppliers. Value comes in a lot of forms. If we take cost out, our customers can provide their services and products at lower cost and they can gain market share.
Some industry analysts said they were impressed with the arrangement. I think its a bold move, said Erick Brethenoux, an analyst with Lazard Freres & Co. Well have to see what will come out of it.
The ATM market in Japan is highly developed, said Mr. Brethenoux, who has a buy recommendation on NCR. Consumers there can use ATMs to download value onto their smart cards, and some machines can be accessed with infrared wireless devices, he said.
Moreover, Japanese corporate culture lends itself to this type of collaboration, Mr. Brethenoux said. In Japan, theyve been doing that for centuries. You compete in some areas, and you are partners in others. Its part of their culture.
Western companies have a harder time dealing with that either they compete or cooperate, but not both, he said.
The alliance would be bad for Diebold, mainly because NCR and Fujitsu would have more minds at work on problem-solving, Mr. Brethenoux said.
However, Diebold Inc., of North Canton, Ohio, says it is comfortable with its industry position just shy of NCR in self-service technology revenues.
Diebold has also formed alliances with foreign companies, including Hitachi Ltd., one of Japans largest electrical product manufacturers. The ATM company also has broadened its business through acquisition. For example, it entered the voting technology market in 1999 with its purchase of the Brazilian company Procomp Amazonia Industria Electronicain.
Tom Swidarski, Diebolds vice president of strategic development and global marketing, said NCR courted Fujitsu in an effort to re-energize itself after years of little or no self-service revenue growth. Between 1999 and 2001 NCRs annual self-service revenues went from $1.5 billion to $1.6 billion, while Diebolds grew from $930 million to $1.4 billion, he said.
Diebold had gone from being a distant second to being poised to being the largest in terms of revenue, he said.
