NCR profit up 83%, expects to hit targets

Nicole Volpe

NEW YORK: NCR Corp., which makes computer systems and software for banks and retail stores, said on Tuesday that its first-quarter profits before special items rose 83 per cent on stronger sales and it expects to meet its future financial targets, sending its stock surging.

The Dayton, Ohio-based firm reported earnings of $11 million, or 11 cents per share, excluding special items, up from $6 million, or 6 cents per share, a year earlier. Analysts were expecting earnings of 7 cents to 10 cents a share, with an average of 8 cents, according to Thomson Financial/First Call.

Sales, boosted by continued high demand for NCR's software that helps firms manage relationships with customers and suppliers, rose 10 per cent to $1.38 billion. "We continue to see good momentum in each of our key businesses, but we are not immune to an economic slowdown," chairman and chief executive Lars Nyberg said. "However, given the current environment, we believe we can meet our targets."

The company said it was comfortable with the current range of analysts' earnings per share estimates, with the consensus for the full year at $2.64. It said it was targeting five per cent sales growth in the second quarter, with 20 percent growth in operating income.

NCR's shares jumped to close up at $3.88, or nearly 10 per cent, to $43.74 on the New York Stock Exchange. The stock has outperformed the S&P 500 by more than 30 percent since the beginning of 2000. Gross margin was 29.8 per cent of revenues, up 1.3 points over last year's first-quarter gross margin of 28.5 per cent. Currency exchange rates had a negative 3 percent impact on overall revenues.

NCR reported an operating loss of $19 million. Excluding $2 million of integration charges related to its 4Front Technologies acquisition and a previously disclosed $39 million charge, NCR's operating income was $22 million. While most technology companies are seeing slack sales in the United States, NCR posted 8 percent revenue growth in the Americas compared with a year ago.

Sales in Europe were up 14 per cent, and Asia/Pacific sales, including Japan, were up 8 per cent. The firm also said order activity was strong, resulting in what it said was a good backlog of business entering the second quarter. Sales of NCR's data warehousing technology, which is its fastest growing business, grew 21 per cent to $236 million. The software is designed to analyze purchasing patterns so that businesses can offer personalized products and services to customers.

"The data warehousing business is doing a little better than we all expected for this quarter and, given the environment, it's commendable," said Lazard Freres analyst Erick Brethenoux. The data warehousing unit is currently operating at a loss Brethenoux said, due to a large amount of research and development costs associated with making NCR's system compatible with other vendor's systems.

"That is a very smart thing for them to do, and I expect the business to be profitable again in the third quarter," said Brethenoux. Retail store automation sales, which include point-of-sale terminals, scanners and self-checkout machines, grew 18 per cent. Sales in the financial self-service business, which supplies bank automatic teller machines, increased 8 per cent.

(C) Reuters Limited 2001.