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Corvex Management Ups Its Position in NCR

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Apr. 15 2015, Updated 12:08 a.m. ET

Corvex adds to stake in NCR Corp

Corvex Management added to its stake in NCR (NCR). The position accounted for 1.93% of the fund’s total portfolio in the fourth quarter. The fund increased its position from 1,557,396 shares in 3Q14 to 5,394,300 shares.

In February, Market Realist noted that JANA Partners added significant stake in NCR.

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Revenue growth led by software-related revenue, especially Cloud

NCR’s 4Q14 revenue was in line with Wall Street estimates. Revenue grew 6% to $1.77 billion, up 11% in constant currency. It saw 32% growth in software-related revenue to $477 million—including 231% growth in Cloud revenue to $129 million.

The revenue growth was led by NCR’s Financial Services segment where branch transformation revenue continued to grow. Revenue growth in the segment saw contribution from Digital Insight—it was acquired earlier in 2014. NCR said its Retail Solutions segment saw lower growth than the previous year. It added “we continued to face redirected information technology spending and delayed customer rollouts. Hospitality was lower due to decreased spend by certain global quick-service restaurants. Emerging Industries was lower due to the impact of the travel business.” Revenue also saw a negative impact of 5% due to foreign currency headwinds.

Gartner forecasts slower information technology spending for 2015

Gartner noted in January that “Worldwide IT spending is on pace to total $3.8 trillion in 2015, a 2.4 percent increase from 2014; however, this growth rate is down from earlier projections of 3.9 percent.” It added that “The slower outlook for 2015 is largely attributed to the rising U.S. dollar as well as a modest reduction in growth expectations for devices, IT services and telecom services.”

These trends are bound to impact NCR and other companies in the in the retail and hospitality sectors—like Hewlett-Packard (HPQ), Oracle (ORCL), and IBM (IBM). In its annual filing, NCR noted that it competes with companies like Diebold (DBD), Fidelity National Information Services, and Unisys in the Financial Services segment.

NCR has 0.14% exposure to the iShares US Technology ETF (IYW). IBM and Hewlett-Packard have 4.20% and 1.65% exposure, respectively, to IYW.

Overview of NCR 

NCR is based in Duluth, Georgia. It’s a provider of consumer transaction technologies. It offers software, hardware, and a portfolio of other services. It enables over 550 million transactions daily across retail, financial, travel, hospitality, telecom, technology, and small businesses.

NCR manages and reports its businesses in the following four segments:

  • Financial Services – includes a comprehensive line of ATMs (automated teller machines) and payment processing hardware and software. It also includes cash management, video banking and customer-facing digital banking software, and related installation, maintenance, and managed and professional services.
  • Retail Solutions – includes retail-oriented technologies like point-of-sale terminals and point-of-sale software, an omni-channel retail software platform with a comprehensive suite of retail software applications, innovative self-service kiosks like self-checkouts, and bar-code scanners.
  • Hospitality – includes point-of-sale hardware and software solutions, installation, maintenance, managed and professional services, and a complete line of printer consumables.
  • Emerging Industries – includes maintenance as well as managed and professional services for third-party computer hardware provided to select manufacturers—mainly in the telecom industry. It also offers solutions for the travel and gaming industries, including small kiosks, and for the small business industry, including an all-in-one point-of-sale solution.

In the next part of this series, we’ll review Corvex Management’s increased position in Oceaneering International.

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