NCR recently announced its plans to separate its Teradata Data Warehousing business from its core Banking and Retail business. Research firm Gartner believes the move will lead to two stronger entities, each focusing on its respective strengths.

NCR has done well financially since acquiring Teradata and refocusing on two businesses, but Teradata and NCR’s retail and financial self-service divisions have not integrated well, at times making it difficult to prioritize necessary resources. Realizing this, NCR's new CEO Bill Nuti will separate it into two companies, giving each entity the ability to grow without the need to prioritize resources across disparate business units.

"By 2008, either the two new entities will continue and grow as separate businesses (0.7 probability) or one of the new companies will be acquired (0.3 probability). In either case, we do not believe the separation is intended for the purpose of immediately selling one or the other," say analysts at Gartner.

In the first scenario, the separation gives both companies the ability to raise funds and focus resources on their specific products. This would allow Teradata to make acquisitions to build a complete data warehouse solution set to meet growing competition from HP, IBM, Microsoft and Oracle. On the other hand, NCR will focus primarily on its self-service strategy for retail, hospitality and financial services businesses, as well as its core point-of-sale, check-processing, customer support service and business consumables businesses. The key to success for NCR will be to build ever-cheaper devices that can stand up to the rigors of use by the public while continually adding computing power and ergonomics.

In the second scenario, if Teradata were acquired, it would be for the technology and the people, and we believe it would continue to operate as a unit (much as it has at NCR, with no detrimental effects on the clients). If NCR is the target, then Gartner would expect the acquiring company to absorb the product lines into their offerings. NCR's retail business is still solid at this point but point-of-sale hardware is becoming a commodity. NCR's self-service check-out devices are good but have a limited market.

Gartner recommends that clients and prospective clients of NCR and Teradata make no changes to their plans or strategies for the time being. The separation is a positive move under all scenarios and should not change customers’ future strategies. If either new company is acquired, it would lead to more complete solutions integrated with the buyer.

Teradata customers must recognize that Teradata is an aggressive marketer and product development company that seems to be girding for battle with its larger competitors.

Customers can expect even more aggressive release and product development management. Finally, NCR customers should expect to see a greater focus on new and well-integrated products.