NCR Corporation (NCR) recently agreed to acquire Radiant Systems Inc., a provider of hardware and software systems for the restaurant and hotel industry, for $1.2 billion in cash.
NCR, a leading technology and solutions provider for the retail and financial services industry, is expected to pay $28.0 for every share of Radiant Systems. At the current purchase price, the tender offer reflects a 28.0% premium over Friday’s closing price of $21.95.
The news of the acquisition drove the company’s shares to $28.0 in extended trading after having plunged 50 cents to $21.45 earlier on Nasdaq. Moreover, NCR shares rose 2.1% to $19.50 in extended trading after falling 36 cents to $19.09 earlier on the New York Stock Exchange.
Post acquisition, the company plans to combine its portfolio of automated checkout products with Radiant’s systems portfolio, which caters to the fast-food and table-service restaurants, specialty and convenience retailers and entertainment venues. NCR has been seeking to expand into areas similar to its main product line, including ATM machines and self-check-in airport kiosks.
NCR expects to fund the acquisition with a new debt of approximately $1.1 billion, which is expected to close by Sept. 30.
The company has always tapped new markets through smaller acquisitions. To expand its self-service offering into the digital media merchandising market, NCR recently acquired Touch Automation, LLC and Ambient Partners, utilizing the acquired technology to launch NCR Xpress Entertainment, a next-generation multi-channel entertainment kiosk solution.
In a bid to further expand customer options for delivery of digital entertainment, NCR announced a licensing agreement with e-Play that will add bare-disc technology to NCR’s existing global self-service technology portfolio and assist its development as an independent service operator (ISO) in the entertainment market.
Moreover, in November 2009, NCR purchased the assets of Netkey, Inc., a leading kiosk and digital signage software applications provider, for an undisclosed amount. This acquisition is expected to enhance NCR’s digital signage application platform, which is built on the same platform as Netkey’s kiosk applications, thereby enabling the deployment of NCR’s solutions.
Apart from increasing its presence through regular acquisitions, the company is slowly expanding in the cloud computing space. Technology research firm Gartner estimates that the cloud computing market will be worth almost $150.0 billion globally by 2014. Moreover, the cloud-based services, which range from Software as a Service (SaaS) to Infrastructure as a Service (IaaS) on a pay-as-you-go basis, are likely to emerge as a key element in many corporate IT strategies over the next several years.
So NCR has entered the cloud computing business at the opportune moment with a compelling business model that has the potential to fetch rich dividends for the company.
In addition, the ATM and retail POS upgrade cycles are clearly moving along nicely, as the company reported year-over-year growth in financial services and retail/hospitality. There is a fair chance that the backlog/order growth will further be realized in terms of revenues in the second quarter and accelerate through 2H11.
Moreover, the entertainment segment is also growing and offers a good opportunity, which the company intends to seize in a big way.
NCR reported decent first quarter results, with revenues improving across all regions, especially in BICMEA (Brazil, India, China, Middle East and Africa). The upside in revenues was attributable to higher customer wins across all sectors. However, overall sales improved due to a recovery in macroeconomic conditions particularly in retail, financial services and hospitality industries.
We are encouraged by NCR’s second quarter guidance, and believe that the company is well positioned to deliver solid momentum across all its businesses. We appreciate the company’s market leadership, successful acquisitions, product introductions and continued customer wins.
However, we are a bit concerned about its Japan business, which has been hit by the recent natural calamity. Moreover, the restructuring initiatives have begun impacting results.
Currently, NCR Corp. has a Zacks #2 Rank, which translates into a short-term Buy rating.
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