NCR Rings Up a Dud

Why would a technology company that provides products and services such as ATMs acquire a DVD kiosk company (DVDPlay)? Call me crazy but the deal doesn’t sit well with me even through the share price is up more than 15% since the deal was announced Thursday.

I don’t want to sound like a Grinch. To be fair, NCR does provide self-service kiosks to a variety of industries. However, it has limited itself to providing the kiosks, and focusing its investments on self-service technology. This deal is different. NCR will take on more of an operational role.

But wait, that’s not the worst news. Teaming with Blockbuster, it will face strong headwinds. Actually, it is more like a hurricane-type storm. Coinstar’s Redbox has over 22,000 kiosks plastered in various supermarkets and other places. Meanwhile, NCR, which added 1,300 kiosks with this deal, estimates it will have about 3,800.

True, NCR is eventually hoping to allow consumers to download movies from the kiosks. The consumer will still fall back on the old standby, video on demand services commonly offered by cable providers, which they can do from the comfort of their own homes. I also fully expect more offerings to be available over the Internet.

I understand NCR has had a difficult year. For its most recent quarter (ended September 30th), its revenue declined 18% year over year, and operating income was down a precipitous 71%. I just don’t think expanding into a commodity-type business in which competition from other sources is going to intensify, is the way to go.