NCR Corporation (NYSE:NCR) announced its plans to spin-off 100% of its Teradata Data Warehouse business in six to nine months. Teradata currently generates $1.5 billion in revenues with operating income amounting to $309 million. The division's award-winning solutions enable
organizations worldwide to gain a single, integrated enterprise view of
their business to enhance decision-making, customer relationships and
profitability. The spin-off should provide NCR with significant amounts of cash that it could use to fund other acquisitions or return to shareholders.
In a press release, Bill Nuti, President and CEO of NCR said, "
This
separation is a logical strategic step for NCR. We believe it will
benefit our customers, business partners, employees and shareholders.
Teradata and the new NCR operate in different markets each with solid
prospects for the future, but they have markedly different business
models. Both new companies should benefit from sharper management focus
on their unique business opportunities. Each new entity should be able
to more effectively pursue their specific growth and research and
development agendas, while designing employee incentive plans that are
more directly aligned with their own performance and growth objectives.
In addition, NCR investors should benefit from increased transparency
and clarity, which will allow them to more appropriately value the
merits, performance and future prospects of both companies.
"
While the company has not yet filed a 10-12b detailing the stock distribution, this move does represent a great opportunity for shareholders. On the average, spin-offs outperform the overall market, a phenomena so popular that there is now an ETF focusing on this exact strategy! This occurs because parent company shareholders tend to sell their shares immediately after receiving their distribution, thereby creating a downside pressure that has no fundamental justification. This makes NCR a stock worth watching closely.
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