NCR announced plans this week to spin off its Teradata data-warehousing subsidiary as an independent company. NCR, which is best known as a provider of ATMs and retail checkout machines, had sales of $4.5 billion in 2005, excluding Teradata. The Teradata division, one of the biggest players in the data warehousing and business intelligence market, had sales of $1.5 billion and operating income of $309 million. Baseline contributing editor Mel Duvall spoke with new Teradata chief executive Michael Koehler about the timing of the move and what it will mean for customers moving forward.
Baseline: What was the reason behind the spinoff, and why did it make sense to do it now?
Koehler: It was a very logical decision in the sense that Teradata and NCR are very different businesses. Teradata is a market leader in its category, data warehousing, and on the NCR side of the house, you have a business that is a market leader in ATMs and other self-service devices. So, it was a very logical thing to spin off the two companies so they could go and focus on their own businesses. In regard to timing, over the past three or four years NCR executed a very strong turnaround in terms of profitability, and its stock price has greatly appreciated during that time period. Also during that time period, Teradata grew 12% in 2004 and 9% in 2005, and our own profitability grew to the point where Teradata is a very successful business on its own. Basically, the two companies both have attractive businesses going forward. Five years ago, we weren't in the state we're in today.
Baseline: Who is on the new management team, and where will the company be headquartered?
Koehler: An interesting thing is that the management team--myself, Bob Fair [chief marketing officer] and Bob's peers--have been together for about 3 1/2 to four years and we've had a really good run together; it's a great team. We'll determine the official headquarters at some other point and time; it's really not a priority in terms of the things we need to get done. Teradata operates on three main campuses: Rancho Bernardo, Calif.; Dayton, Ohio; and Atlanta [where Koehler is based]. If you look at the headquarters functions, we're pretty distributed across those three locations, and our plan is to continue to operate in those three locations.
Baseline: What impact will this have on customers?
Koehler: Easy answer--zero impact. Teradata has operated as its own integrated business within NCR for six or seven years, so every resource, be it research and development or customer service, is contained within Teradata. So, there will be zero impact.
Baseline: Will there be a change to technology strategy?
Koehler: Here again, as an integrated business unit, we were already executing our own strategy. Having said that, [being] a free-standing entity allows us to have an absolute 100% focus on the business and to operate with more speed.
Baseline: What will you miss about being part of the NCR family?
Koehler: There are a lot of people here who began with NCR before becoming part of Teradata. I've got 31 years with NCR, the last seven with Teradata--so you're right, it has been a very close-knit group of people, a family. But in many ways, we operated as a business partner to the units within NCR, and I think we'll continue to work closely as a partner way into the future.