NCR to spin off Teradata

IDG News Service - NCR Corp. and its Teradata data warehousing division will separate into two publicly-traded companies in a move designed to better focus their respective business strategies, NCR announced Monday (download PDF).

Teradata, which makes enterprise-grade data warehousing software, and NCR have different business models and markets, Bill Nuti, NCR's president and CEO, said in a statement. NCR's businesses include automated teller machine and retail point-of-sale technologies.

The separation will allow for a sharper management focus and better employee incentive plans, Nuti said. Teradata and NCR had effectively been running as two stand-alone businesses for several years, he explained during a conference call with analysts.

NCR deliberated for some time over whether to spin off Teradata, but "we didn't feel Teradata was sound enough, really," said NCR Chairman James Ringler. "Only a few years ago, it wasn't making money."

In 2005, Teradata had revenues of $1.5 billion and an operating income of $309 million excluding pension expenses, NCR said.

Teradata was the sixth-largest vendor of data warehousing tools in 2005, holding 4.4% of the market, according to a research report from IDC released in August. Teradata held a 10.3% market share in the data warehousing management segment, where the business generates most of its software revenue, IDC said.

"Over the years, the company has maintained its steady focus on enterprise data warehousing within high-end data warehousing environments," IDC said in the report.

Once it attains its new status, Teradata will focus on investing in its consulting services and applications while expanding its list of partners, Nuti said.

Meanwhile, NCR plans to expand its efforts in self-service devices, which Nuti said are increasingly being adopted in the health care, public-sector, travel and gaming markets. The types of devices include automated deposit machines at banks and airport ticket kiosks.

Future acquisitions by NCR will be focused on smaller companies in the self-service area, Nuti said. "We think it's important to build out from an innovation standpoint a self-service platform," he added.

The separation of Teradata and NCR is expected to be finalized in six to nine months. Nuti will head up the smaller NCR, while Mike Koehler, the current senior vice president of the Teradata division, will become president and CEO of Teradata.

The division must be approved by NCR's board of directors. The plan calls for holders of NCR common stock to receive Teradata stock, although the distribution ratio has not yet been determined, NCR said. The Internal Revenue Service must approve the stock transfer, which should be tax-free for NCR shareholders, the vendor said.