Ncr: Back From The Brink – Lars Nyberg CEO of NCR Corp – Interview
Lars Nyberg seemed to do the impossible when he revived NCR. But can he convince the world the company’s not just for cash registers anymore?
Taking a company from hemorrhaging to health is no mean feat, but corporate doctor Lars Nyberg surprised an industry– and Wall Street–when he successfully resuscitated NCR from a near-death experience six years ago. Four years after its hostile takeover by AT&T, the 100-year-old cash register-cum-PC-maker was bleeding to the tune of $2 million a day. Today NCR has two strong quarters behind it, and its stock, trading recently at $46, has a long-term buy rating from Merrill Lynch.
CEO Nyberg exonerates AT&T for at least part of NCR’s trouble, saying NCR was “in potentially deep trouble when the telecom giant bought it in 1991, though they failed to see it. In the late 1980s, NCR was heading into the same problems as Compaq and Data General when the industry went to open systems and prices dropped dramatically.” But he adds, “AT&T’s management style didn’t help; it just piled on the losses, and by 1995, it was bankrupt. Even AT&T starts recognizing a $2.5 billion loss.”
Ma Bell rang up Nyberg based on his having turned around the information systems division at Philips Electronics. Still, bringing this tall Swede to Dayton, OH, seems a stretch. But apparently, NCR was a tough sell in the States. “AT&T tried hard to find someone in the U.S., but no one wanted the job,” says the 49-year-old native of Enskede, Sweden. “A European wouldn’t understand how bad a shape the business was in.”
Nyberg acted fast, his scalpel cutting more than 13,000 jobs and trimming computer hardware and other fat to focus on three businesses–ATMs, store automation, and database management software–and on customer service to back them up. His premise: “In technology, you’ve got to be number one, two, maybe three. If you’re number six, you won’t survive. [I thought] if we could focus on a couple of businesses that were number one and two, there was a chance to save this company.”
It’s rare for a business that had fallen so far behind to make it back from the brink–especially in the knowledge sector. Nyberg points to a confluence of contributing factors: the company’s strong technologies, company pride and a “willingness to fight this long war,” loyal customers, and a “bit of luck that the economy was good.” He adds, sotto voce, “I probably helped a little bit, as well.”
Though some criticized Nyberg’s counterintuitive decision to focus so squarely on NCR’s high-end data warehousing business, Teradata, others now think him visionary. “He’s forward-looking,” says Tom Kraemer, managing director at Merrill Lynch. “It wasn’t a self-evident choice in 1997 to invest in a business where all you have to do is beat Oracle and IBM.”
Nyberg considers himself lucky that, at the time, “not many people understood Teradata’s value” and left him with the chance to run with it. On this he bet the farm, and analysts echo his predictions that the bet will turn profitable by year-end.
Data warehousing is recognized as a hot market today, but five years ago, few seemed to know how to capitalize on the technology, and most saw it as a multimillion dollar electronic filing cabinet. But Nyberg picked up on the potential of “active” data warehousing, aka knowledge management, which allows for use of information in complex ways by multiple, simultaneous users. A company’s VP of sales, for example, can use it to analyze the purchasing activity of its most profitable customers. The technology can also be helpful in a crisis, such as when a courier’s plane breaks down. “You know profitability by customer, you know where your fleet is, you know the weather, and the computer can do optimal routing of that plane’s load,” says Nyberg. “You give power to the front soldiers by giving them the data.”
“Most companies still aren’t doing that,” says Kevin Strange, industry analyst and VP of Gartner, but he sees data warehousing on the rise. Technology research firm International Data Corp. of Framingham, MA, estimated last year that this $23 billion market will reach $55 billion by 2004. As proof of the sector’s health, NCR’s total revenue grew 10 percent during the first quarter this year, thanks to Teradata’s 21 percent growth, but bullish analysts varyingly predict 25-30 percent growth for the division this year. An unusual forecast these days, perhaps, but Nyberg says the dot-com debacle and slowing economy haven’t hurt data warehousing. “Retailers need to be more competitive by using their data–that’s what my customers are telling me.” Strange confirms that organizations “that ordered their IT departments to implement knowledge management, but didn’t give them dollars to do it right a few years ago, are seeing the error of their ways and are now doing it correctly.” Customer relationship management (C RM), he adds, “has increased the attention in this space.”
Yet, even in the face of sector growth, Nyberg faces a troubling brand issue: Many don’t know that NCR isn’t grandpa’s cash register company anymore. And the CEO still seems to be sorting out how to change his company’s face to match its internal metamorphosis, ruminating about removing the vintage cash registers that have long decorated NCR’s headquarters. But he knows that won’t get NCR to the table to bid against key knowledge management competitors IBM and Oracle, despite having what analysts consider the superior product for the high end (typically characterized as one terabyte and above). Few know that NCR beats Oracle even at the midlevel market of 500 gigabytes, where Nyberg needs to shore up customers.
However, IBM promises NCR a run for its money. “Today the top-end data warehousing business is moving toward [IBM],” says Kraemer, who believes Big Blue will eventually catch up–and he’d like to see more aggressive marketing from NCR. “Oracle’s not a subtle competitor,” he says, adding that NCR has “nothing to lose. Its message should be sharper.” Teradata’s COO Mark Hurd concurs: “We’ve got to do a better job with the overall awareness. We do quite well once we’re in the transaction, but we don’t get to the plate enough.”
As for the other NCR businesses, store automation is bringing home some bacon, but ATMs serve as the cash cow, bringing in $1.5 billion of NCR’s 2000 revenues–$5.96 billion–with most of the free capital being plowed back into Teradata, according to Merrill Lynch’s Kraemer. But with U.S. and European ATM markets reaching saturation, can such profits continue?
Nyberg’s answer is that over half of NCR’s revenues come from overseas, with business in Asia doubling yearly over the past three years. While the U.S. economy slows, Nyberg sees Asia “with the most potential for growth,” and even predicts “Asia-Pacific might be the biggest region for most companies in my lifetime.” With first-to-market advantage for ATMs in the region, he has the hardware upper hand. “Having a dispensing technology for all the different currencies of the world isn’t easy–something our competitors don’t understand. We qualify our dispensers by currency,” he says, adding that NCR builds ATMs specifically to handle the tissue-thin Indian rupee.
Nyberg envisions “wiser ATMs” and has plans to expand their functionality. “I use an ATM three times a month and they never learn anything about me,” he says. “Active data warehousing will allow a bank–or a retailer, airline, or telecommunications company–to suggest things to fit the customer.”
This raises the touchy issue of privacy, and Nyberg comes down firmly on the side of private initiatives to resolve privacy concerns. “Europeans have the tendency to solve things with legislation,” he says. “The good news,” he says, is that “more banks and my competitors all understand if we don’t handle this in a way the customer likes, we’re going to be in trouble.”
His European experience has taught Nyberg that “business is global, but sales is local,” and so he maintains an international organization without relinquishing the personal. “[When] you sell something big and complicated like a data warehouse, it’s still a question of relationship and trust. Somebody in my country, Sweden, will feel more comfortable with somebody who lives in the same town who speaks Swedish than somebody who flies in from the UK.” COO Hurd considers global service and support the reason their data warehousing ranks No. 1 in Korea. “We’re there, we get it up and running practically at light speed.”
After six years leading NCR’s rehabilitation, Nyberg has no plans to leave Ohio, but he maintains a home on the water in Stockholm and another in Naples, FL, and keeps boats in both places. For a recent vacation he cruised to Alaska with his wife of 30 years. Perhaps it was his being a strong swimmer that helped him pop back up like a cork with NCR in hand, but Merrill Lynch’s Kraemer believes “he has a lot to prove yet,” including among the challenges sustained execution, continuing to drive new customers with data warehousing, and branding.
Nyberg had predicted in 1997 that NCR’s revenues would reach $10 billion by 2000, but he’s pruned the portfolio since then. “I hoped we’d have more growth last year, and it’s finally coming. A great stock price is driven by growth and profits, so I’m now focused on the bottom line. Our valuation is such that we could be very successful this year, creating more excitement about NCR than whatever else I can do. It will take us time to get to $10 billion, but we’ll get there. And we’ll be very profitable, because most of it’s coming from data warehouse.”
What about speculation about a Teradata spinoff? Nyberg doesn’t deny the possibility–just the timing: “Two years ago, analysts didn’t believe me about Teradata; now they’re saying, ‘Sell!’ It has to be profitable first–which we expect by the end of this year. Then we can have that discussion.”
COPYRIGHT 2001 Chief Executive Publishing
COPYRIGHT 2001 Gale Group