Upcoming Spin-Off: NCR & Teradata

NCR Corp (NCR-NYSE) has made a somewhat surprising move this morning, and its shares are up 4% in applause of the deal.  NCR hired J.P.Morgan to separate into two independent publicly traded companies through the spin-off of the company’s Teradata Data Warehousing business, via a 100% tax-free spin-off to NCR shareholders.  This is roughly one-third of the company, so it far from a minimal spin-off of a company that they are just going to jettison to get it off the books.

Teradata had revenues of $1.5 billion and operating income (excluding pension expense) of $309 million in 2005 and is one of the leaders in the enterprise data warehousing market. Teradata enables organizations to gain a single, integrated enterprise view of their business.

NCR will be the same company sans-Teradata: automated teller machines (ATMs), retail self-checkout systems, automated bill payment systems, self-check-in/out kiosks, point-of-sale technologies and customer-support services. Combined, these businesses had revenues of $4.5 billion in 2005.

Bill Nuti, president & CEO of NCR, said, "This separation is a logical strategic step for NCR. We believe it will benefit our customers, business partners, employees and shareholders. Teradata and the new NCR operate in different markets each with solid prospects for the future, but they have markedly different business models. Both new companies should benefit from sharper management focus on their unique business opportunities. Each new entity should be able to more effectively pursue their specific growth and research and development agendas, while designing employee incentive plans that are more directly aligned with their own performance and growth objectives. In addition, NCR investors should benefit from increased transparency and clarity, which will allow them to more appropriately value the merits, performance and future prospects of both companies."

Bill Nuti will serve as president and CEO of NCR, and Mike Koehler, currently senior vice president of the Teradata Division, will serve as president and CEO of Teradata. Additional information on management and Board composition will be communicated in the future.  This spin-off is subject to certain conditions, including final approval by NCR’s Board of Directors, receipt of a ruling from the Internal Revenue Service with respect to the spin off, the absence of any material changes or developments and the filing and effectiveness of registration statements with the Securities and Exchange Commission. Approval by NCR shareholders is NOT required and the spin-off ratio will be set at a future date within the six to nine months before it becomes effective.

Jon C. Ogg
January 8, 2007

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