NCR Corp: In Slow Growth Mode, No Visible Improvement Ahead

Revenue has remained flat to down over the past decade. In 2004 & 2005, NCR Corp. (NCR) posted increased earnings on meager revenue growth. In 2006 earnings declined again with the expected decrease in tangible book value.

In January 2007 NCR announced that it intends to spin-off its Data Warehousing division to shareholders. It is not clear how this will help NCR abandon its stagnant revenue record or earnings see-saw.

NCR has six divisions all in highly competitive markets;

Customer Services (29%)

Service only firms have been nibbling away at the NCR customer base since 1999. As this sector becomes more competitive, salary and other cost considerations are working against NCR. Outsourcing is more commonplace adding to the difficulties in growing this division.

Data Warehousing (24%)

The Teradata division competes head on with IBM, Oracle, Wincor Nixdorf GmbH and others. IBM is the most formidable competitor. In all fairness, IBM has under funded pension issues whereas NCR has a fully funded employee's pension program.

Financial Self Service (23%)

Once considered to have a quasi monopoly in the ATM business, NCR now competes with Diebold and Wincor Nixdorf GmbH.

Retail Store Automation (14%)

This division has countless competitors ranging from IBM to Dell. NCR generates over half its revenue outside the U.S., competing with Wincor Nixdorf GmbH and Fujitsu.

Systemedia (7%)

Unisys Corp could put more pressure on this division and IBM is determined to gain market share.

Other (3%)

Not meaningful.

Without factoring in the possible spin-off of the Data Warehouse division, we see 2007 GAAP EPS coming in at $2.23. We expect revenue growth for 2007 of 2.0%, a minor improvement to 1.9% for 2006. In conclusion: NCR is in a slow growth mode with no visible improvement ahead.

NCR 1-yr chart

Disclosure: no conflicts.