NCR Corp.
(
NCR
) has gone back to acquisitions in order to tighten its grip on the
Brazilian market. The company recently announced a series of
strategic acquisitions that would further increase its penetration
within the fast growing hospitality industry.
NCR acquired three companies in the region that would help it
cater to different segments of the hospitality industry. The first
is a provider of POS Integrated Solutions that also resells NCR
Aloha solutions for restaurants. The second was Wyse Sistemas de
Informática Ltd., which provides market-leading software solutions,
including the Colibri suite of hospitality software. The third was
Radiant Distribution Solutions (RDS), an NCR Hospitality hardware
distribution partner.
NCR Corp. did not disclose the terms of the deal, but took the
decision to acquire these companies after analyzing in detail the
business potential associated with each acquisition. According to
Euromonitor, restaurant spending in Brazil is expected to grow
9-10% annually.
The expansion of the hospitality business is an extension of the
expansion activity of NCR's hospitality business in Brazil, which
follows the company's alliance with Scopus Technologia Ltda last
year. Under the partnership agreement, 30,000 ATMs will be set up
over five years from NCR's manufacturing plant in Manaus. In April
2011, the company reported its plans to expand its retail business
in Brazil.
As healthcare represents a large market opportunity for NCR. The
company previously entered the Brazilian market with the
acquisition of Galvanon, Inc., a privately-held company and leading
provider of self-service solutions. The acquisition also helped NCR
to secure numerous customers for MediKiosk, a patient check-in
solution provided by Galvanon.
On the other hand, NCR's sales are affected to a certain extent
by seasonality, with the first quarter bringing lower revenue and
the fourth quarter generating higher revenue each year. Such
seasonal nature of the business leads to fluctuation in cash flows
and makes it difficult for the company to predict its working
capital requirements accurately, thereby resulting in inaccurate
cash projection.
NCR reported decent first quarter results with revenues
improving across most of its business segments and geographical
regions while EPS matched our expectation. We are encouraged by the
fiscal year guidance and believe that the company is well
positioned to deliver solid momentum across all its businesses.
The company has improved its operating performance and is
managing its expenses well. Although the restructuring initiatives
have started impacting results, we believe that the company should
reduce its debt balance to further improve its operating
performance, and must come up with new strategies to compete
against
Diebold Inc.
(
DBD
).
The company has a short term Zacks #2 Rank, implying a Buy
rating.
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