In-Depth

Joy Division: NCR, Teradata Vow to Part Ways

After a marriage of more than 15 years, NCR and Teradata to part ways.

• By Stephen Swoyer
• 01/10/2007

It’s official: after a union of more than 15 years, NCR Corp. and its former Teradata division are finally splitting up.

NCR on Monday announced plans to spin off its Teradata division into a wholly separate, publicly traded company. The tax-free spin-off, which the two entities say they expect to conclude within six to nine months, should result in a fully independent Teradata—or, analysts say, a Teradata unleashed.

It’s an auspicious time to separate, Teradata officials claim. “NCR and Teradata are major and attractive businesses, but they operate in different markets with markedly different business models,” said Teradata chief management officer Bob Fair in a teleconference on Monday. “NCR is focused on providing self-service technologies and related solutions while Teradata is focused on providing enterprise data warehousing solutions and consulting services.”

Analysts were mostly upbeat about the split. Philip Russom, senior manager of research and services with TDWI, compares it to another inevitable (and largely automatic) process. “It’s like tectonic plates. Teradata and other businesses within NCR have been slowly drifting apart over the eons. Today a rift opened up, and Teradata is now officially its own continent,” he explains.

Such a separation has long been rumored, Russom says. Nor has there been a shortage of premonitory seismic tremors: some time ago, for example, NCR began breaking out Teradata’s income and revenue from its aggregate financials. “That was a smart move,” Russom continues, “because it enabled all kinds of people—customers, investors, analysts, journalists—to see that Teradata is a large business.” For the record, he notes, Teradata posted revenue of $1.5 billion and operating income of $309 million in 2005.

More to the point, Russom says, NCR’s Teradata division comprises an extremely viable—and, finally, independent—entity in its own right. “Teradata progressively replaced shared services from NCR with its own infrastructure and developed a management structure that you’d expect from an independent corporation. For years, we’ve know that Teradata would fledge, we just didn’t know when—until today,” Russom concludes.

NCR and Teradata officials, citing regulatory concerns and blackout requirements, left a lot of questions unanswered. They did disclose that Teradata Senior Vice President Mike Koehler will take the helm as chief executive of the newly independent Teradata. But they hedged—or glossed over—another, altogether more pressing question, says Mike Schiff, a principal with data warehousing consultancy MAS Strategies: just what is to become of the NCR hardware that currently powers Teradata Warehouse?

“Why does everyone assume that it’s a software/hardware split, with Teradata getting the hardware and NCR the servers?” Schiff asks.

That question didn’t come up during the analyst conference call on Monday, but it’s one of the most vexing loose ends of the whole transaction, he argues.

“At no point did they say what happens to the servers, and if you go to the NCR Web site, they promote only a couple of their entry level servers. If you want their midrange or high-end servers, they direct you to Teradata. So does that mean that Teradata inherits their server business?” he asks.

(TDWI has entered an official inquiry with Teradata personnel, but at press time, no answers had been proffered.)