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Growth in self-serve POS, DVD kiosk rental give NCR strong 3Q

NCR reports healthy revenues in the quarter as clients worldwide turned to its self-serve devices.

October 21, 2010

NCR Corp. yesterday reported third quarter revenues of $1.2 billion, a rise of 6 percent from the same period a year ago. The firm's Entertainment division, including its BLOCKBUSTER Express DVD kiosk, generated higher revenues as NCR continued on its path to install 10,000 of the kiosks in North America. In addition, the firm's self-service retail point-of-sale checkout systems are seeing record growth, executives say.

Across all divisions, NCR’s income from continuing operations in the third quarter totaled $78 million, up from $15 million in the same period in 2009 when the company reported $41 million in pension expense and two charges totaling $23 million.

The Duluth, Ga.-based international industrial firm doesn't break out revenues for its product lines that include ATMs, point-of-sale equipment and other devices for the retail, healthcare and financial services sectors. In recent years NCR has also aggressively marketed the customer self-checkout systems and the DVD-rental kiosks that it licenses from Blockbuster and operates under the BLOCKBUSTER Express name.

Bill Nuti, chairman and CEO, said during a conference call with stock analysts that NCR's business is changing, with clients worldwide asking for a variety of service offerings they can offer to consumers.

"Our customers want more than an ATM, they want a multichannel approach. They want to have a self-service offering, an Internet branch, a mobile offering, and an ATM. Multichannel is the key to being competitive," Nuti said.

Beyond the big-picture proclamations Nuti discussed individual segments.

NCR's DVD kiosk, classified under the entertainment kiosk division, generated revenues of approximately $30 million in the third quarter, $25 million in the second quarter and $20 million in the first quarter, executives say. The increase is due to a rise in installations, now at about 7,500, and the greater revenues generated by a kiosk as it becomes established at a location. Nuti says NCR's relationship with Blockbuster remains strong despite that firm's recent bankruptcy filing.

NCR is working to counter the competitive threat of digital download of movies and games that is being offered by cable companies and Netflix. During the quarter, NCR teamed with MOD Systems to install Download2Go digital kiosks at 20 InMotion entertainment stores in 12 U.S. airports. The kiosks allow consumers to purchase or rent digital movies by transferring content to portable Zip drives where it can be watched on Windows-enabled PCs and other electronics devices.

NCR also signed with content provider Universal Studios an agreement to offer movies in the Express kiosk for a premium above the standard $1 nightly rental. With the premium movies NCR will be able to skip the traditional 28-day delay that studios require of competitors like the dominant redbox DVD-rental kiosk.

In the retail self-checkout sector, Nuti says, orders were rising around the world.

"In self-serve we are having a record year with significant growth. Sales are up 48 percent year-to-date," Nuti told analysts. That is primarily in the United States and Europe but also in emerging markets such as Turkey, Nuti says.

Two other trends are benefiting NCR's self-serve POS equipment sales. Consumers are switching to the equipment so the self-serve usage rate at checkout that used to be about 20 percent is rising, Nuti says. In addition, NCR is seeing equipment sales outside its core market of supermarket chains.

"(Sales) are across the board. For us grocery has been our strength. But we are now seeing sales in convenience stores, drug and even general merchandise," Nuti said. "We've seen that over the last 12, 18 months. So there is a better balance and a better balance geographically too."

The company pointed to several successes in the quarter in its retail sector, including the launch of two compact POS terminals.

In addition, Hudson's Bay Company, Canada's largest diversified general merchandise retailer, deployed NCR's SelfServ 60 kiosk systems in-store at Bay and Home Outfitter locations across the country. And the New England grocery chain Big Y Foods completed its initial deployment of automated deli ordering kioskspowered by NCR's self-service technology.

NCR broke down sales by its international regions.

In the Europe/Middle East/Africa (EMEA) region, revenue grew 10 percent from the third quarter of 2009 due to a higher volume of product and services sales in the financial, retail and hospitality industries. In the Asia-Pacific-Japan (APJ) region, revenue increased 5 percent as compared to the prior year. Revenue increased 4 percent in the Americas region over the prior year period due to growth in the retail and hospitality and entertainment industries. These increases in the Americas were partially offset by decreases in the financial services industry.

NCR also announced it expects full-year 2010 revenues to increase in the range of 2 to 5 percent, and now expects its full-year 2010 income from operations to be in the range of $92 million to $102 million.