NCR Corp. said its decision to spin off the Teradata warehousing division will let it focus on its core self-service technologies businesses, especially automated teller machines and checkout systems.
The Dayton, Ohio, company announced the spinoff plan Monday, acknowledging that the Teradata business, which sells database software, data mining, and consulting and support services, lacked synergies with its other operations.
Teradata and the other NCR businesses "operate in different markets with markedly different business models," Bill Nuti, NCR's president and chief executive, said in a conference call Monday. "There are not really any synergies on the revenue side."
NCR sells equipment for several industries, but Mr. Nuti said the new company would be "focused on self-service technologies, including ATMs; self-checkout systems for retailers; automated bill payment kiosks; and self-check-in systems for airlines, hotels, and hospitals."
Jim Ringler, the Ohio company's chairman, said during the call that the board has been contemplating a Teradata spinoff for years but retained the division because it was not "sound enough."
"Only a few years ago, it wasn't making money," Mr. Ringler said. "As it began to make more money and get a very solid base, we felt it would be the time to give it serious consideration. So that is what started in the past year."
Mr. Nuti, who took the helm at NCR about 18 months ago, will remain president and CEO. Mike Koehler, currently the senior vice president in charge of Teradata, is to be its president and CEO.
The spinoff is expected to occur in the next six to nine months through a tax-free distribution of all of NCR's Teradata stock to existing NCR shareholders.
Teradata's revenue equals about one-third of NCR's but generates more profit than the rest of the company. NCR released a financial breakdown Monday that showed self-service system operations bringing in $4.5 billion in revenue in 2005 and generating $251 million of operating income. Teradata had revenue of $1.5 billion and operating income of $309 million.
In the third quarter, the company reported overall revenue 1% higher than the year earlier, at $1.5 billion, though net income plunged 60%, to $89 million, mainly due to a large one-time tax settlement in the comparison quarter. Excluding the $137 million settlement, NCR said its income was up 4.7%. Teradata accounted for $378 million of third-quarter revenue. NCR plans to announce its fourth-quarter and full-year results this month.
Richard Farmer, an analyst at Merrill Lynch & Co. Inc., wrote in a research note Monday that several key issues regarding the spinoff remain unanswered, including the costs of separating the companies and defining "the fair-value multiples of the separate businesses."
Teradata's shares could be worth $26 to $30, he said, and the rest of NCR could trade at about $17. NCR shares were up 3.63% at midday Monday, to $43.91.
"We expect the stock to trade up as a possibility of spinoff goes from possible to near certain," Mr. Farmer wrote.
NCR is considered the largest maker of ATMs in the world, with its Ohio rival Diebold Inc. a close second. NCR sells both full-service ATMs to banks and, through its EasyPoint LLC unit, cash dispensing ATMs to retailers. It also makes Web-enabled financial kiosks such as the Vcom machine that 7-Eleven Inc. places in its convenience stores.
ATM&Debit News, a sister publication of American Banker, has estimated that NCR shipped about 15,860 ATMs in 2005. Tidel Technologies Inc., which was bought in January 2006 for $10.1 million and became the EasyPoint unit, shipped about 3,135 machines in 2005. Diebold shipped about 17,180 machines that year.
