Separate Ways

Acquisitions and spin-offs often raise questions of potential consequences to the existing customer base of the company in question. But Dayton, Ohio-based parent NCR says its spin-off of data warehouse vendor Teradata will enable the two companies to concentrate on their own markets, customers and business models.

In a written statement, NCR CEO Bill Nuti said both firms would benefit from sharper management focus on their respective business opportunities. "Each new entity should be able to more effectively pursue their specific growth and research and development agendas," he added.

Given the autonomy with which Teradata has operated within NCR, the spin-off will not result in any significant changes in management or customer interaction, according to Randy Lea, VP of products and services for Teradata. "We will really not change anything with regard to how we approach the market in the industries we're going after," he says. "The insurance industry in particular has been a strong one for us, and we think that has tremendous potential for the future." In fact, Teradata was an independent company prior to its acquisition by NCR in 1991.

Teradata will continue to pursue a strategy of investing in its core technology and expanding its "demand creation" staff of presales, sales and consulting professionals, according to Lea. "We have had a strong partnership with the tool providers and will continue to drive that," he says. "Also, we'll be going out and looking at the application providers in the various vertical spaces."

Perhaps the No. 1 benefit of the spin-off is the resulting ability of each firm to focus on a single goal, Lea suggests. "Data warehousing is what we focus on at Teradata -- it is all we do. Now we'll have the whole company focusing on data warehousing, all the way up to the board of directors," he says. "Now, when someone comes up with investing opportunities, directional strategy, etc., decisions will be made solely around the data warehousing space."

Whatever decisions the boards of Teradata or NCR make, both will be on a strong existing financial foundation, according to Kathleen Khirallah, research director at Needham, Mass.-based TowerGroup. The separation "makes a great deal of sense," Khirallah says. "For a long time you had two very distinct lines of business; NCR did a great job of managing both. Now the market is strong, and the timing was terrific. Teradata is a very attractive asset to be spinning off."

Industry observers have speculated that Teradata's value combined with its unattached status may make it a more attractive acquisition target. But Teradata's Lea says he doubts the firm's attractiveness as an acquisition target has changed with the separation. "After the announcement we'll see what the public value is," he comments. "[Acquisition] may even be less likely." --Anthony O'Donnell

With reporting by Maria Bruno-Britz, Bank Systems & Technology, a CMP Technology publication.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio