Is the NCR/Radiant Deal a Win-Win?
With NCR Corporation’s tender offer to acquire Radiant Systems now underway, the hospitality industry is abuzz with talk about how the merger will affect the companies’ standing in the IT marketplace, as well as the potential technological benefits for hospitality end-users.
In a webcast last week, Bill Nuti, NCR’s chairman and CEO, announced that the new acquisition would position NCR to expand into the restaurant and entertainment businesses (in which Radiant already has a strong foothold) by establishing a third core hospitality and specialty retail market vertical.
“Radiant has great software, with a very strong human interface design,” said Sean Alexander, retail technology analyst, IHL Consulting Group. “The combination of Radiant and NCR will give NCR an increased opportunity in theaters, ballparks, amusement parks, etc. This provides them with a greater opportunity in the self-service market.”
More specifically, NCR is interested in leveraging Radiant’s growing SaaS and subscription offerings. Zack Investment Research believes that this move will position NCR to capitalize on the increasing popularity of cloud computing, which Gartner projects to be worth $150 billion by 2014.
“Radiant offers a full suite of solutions driven by a core competitive advantage in software. They’ve developed an innovative SaaS model that enables customers to take advantage of hosted applications for managing their sites—from the back-office to the front door and beyond with their Aloha platform—which enables restaurants, stores and other outlets to connect with customers beyond the site,” said Nuti. “Their product suite has evolved over the last several years, today enabling online commerce transaction processing and business assurance tools in addition to strong e-mail marketing capabilities. All of this adds up to reoccurring revenue streams for Radiant.”
Why is this important?
“Cloud computing is allowing retailers to more cost effectively and efficiently deploy and maintain software, and it enables Radiant to provide functional advantages as well,” explained Nuti. “At roughly $350 million in 2010 annual revenue, Radiant’s SaaS and subscription software revenue will contribute to nearly half a percentage point of NPOI margin expansion on a pro forma basis before considering any revenue or cost synergies.”
Radiant’s end of the bargain
The deal is also expected to accelerate Radiant’s international growth, which up until now, accounts for 16 percent of the company’s revenue. Nuti noted that these market estimates did not include China, Latin America or India. “NCR is strong and well-established in these geographies, and we have inroads to many potential customers. While our customer sets are complementary, I would add that this is really in our sweet spot. We know how to deal and work with these customers. We know how to market to them, manufacture their solutions, service their equipment, and so on. All of which speaks to the ease of integration on the customer side, as we leverage the growth opportunities going forward.”
The bottom line for the end-user
Combined, the two companies will be positioned to offer customers an enhanced portfolio of point-of-sale and multichannel self-service solutions with a best-in-class global customer service organization, said Nuti. The company expects to see integration opportunities worked out as the solution portfolios are integrated across the two companies. At this point though, it is unclear what some of those planned technology bundlings may be.
Lastly, NCR is strengthening its expertise by bringing in a wealth of talent. “There are many former NCR people already at Radiant,” said Alexander. ‘We think that they will find that it’s not the old NCR.”