A weakness in its data warehousing business was blamed for a 16% drop in NCR Corp’s share price last week, even though overall results at the company were in line with expectations. NCR saw net income of $3.3m for its first quarter, or $0.03 per share, compared with break even in the first quarter last year. Analysts had forecast $0.01 per share. Revenues were up 1.8% to 1.33bn.
NCR is shifting its business from its traditional hardware server focus over to software and services, and says that, excluding the anticipated 40% decline in sales of hardware not included as a component in a full customer system, orders were up 11%. Retail products saw a sharp rise and financial product orders were also up. But although orders for enterprise servers, systems and software associated with data warehousing were essentially unchanged, revenues from data warehousing dropped 7% to $113m. Despite being only a tiny proportion of revenues as a whole, analysts view the data warehousing business as strategic, and one of the main drivers of long-term growth in the company.
Mark Hunt, in charge of NCR’s data warehousing business, said that he was still expecting double digit growth this year from the National Accounts Solutions business which includes data warehousing. The division houses all the Teradata business NCR acquired in the early 1990s, and in 1996 revenue was still 80% derived from hardware. Software and services now account for 80%. Last year’s double digit growth was achieved despite falling hardware margins and margins, Hunt said. He claimed new account wins were strong during the quarter and that there was a good funnel of forward orders.
Japan was cited as one of the main reasons for reduced revenues. NCR Japan was a 70% owned subsidiary until last year, when NCR bought the rest of the company, and two year ago accounted for nearly 30% of the total data warehousing business. That has now declined to 10%. Hunt says when NCR bought the unit, it found things that made us uncomfortable, for instance the way orders were booked. He said the last two quarters had been spent cleaning the unit up and putting new management in place. The weakness in Japan’s economy didn’t help the situation, Hunt said. Also affecting warehousing business in the quarter were product transitions and (inevitably) Year 2000 worries.
During the quarter, NCR signed a business partnership with Electronic Data Systems Corp and AT Kearny Inc for business intelligence services, and says a similar major partnership deal will be signed within the next few weeks. NCR says the general market for data warehousing and business intelligence is still growing strongly, but that sales are still the subject of long decision cycles. It says it only sees two other companies – Oracle Corp and IBM Corp – in competitive situations. Others who had their toes in the water, such as Tandem Inc and Sybase Inc, have now drifted away said Hunt. He claimed that Oracle’s approach was to split a warehouse up into smaller data marts and try to cobble it together afterwards, while IBM Corp offered multiple choices of databases and hardware rather than a single, focused option.
