The 5 percent increase in revenue from the first quarter of 2006 included 2 percentage points of benefit from currency fluctuations.

NCR reported first-quarter net income of $34 million, or $0.19 per diluted share, which compares to $41 million of net income, or $0.22 per diluted share, generated in the first quarter of 2006. Results for the first quarter of 2007 included $46 million of costs related to NCR's previously announced manufacturing realignment, as well as approximately $2 million of costs associated with the anticipated spin off of the company's Teradata Data Warehousing business later in 2007. These costs equaled $0.22 per share. Results for the first quarter of 2006 included $9 million of incremental pension expense associated with an early retirement program, or $0.04 per share.

"NCR's Financial Self Service and Customer Service businesses were standouts in what is historically our seasonally weak quarter, with the improved sales and profitability of both units driving a solid first-quarter performance. Teradata delivered as expected and its outlook remains encouraging," said Bill Nuti, president and chief executive officer of NCR.

"As illustrated by these results, our market-leading technologies should continue to drive future performance for Teradata and NCR once we complete the strategic separation of the company and begin operations as two independent public companies."

Update on Strategic Separation of Teradata and NCR

In January 2007, NCR announced its intention to separate into two independent, publicly traded companies through the spin off of the company's Teradata Data Warehousing business to NCR's shareholders. This strategic separation is expected to enable the two publicly traded companies, both leaders in their respective markets, to gain a sharper focus on their respective business strategies, distinct customer bases and operational needs.

During the first quarter of 2007, NCR began implementing its plan to complete the eventual spin off of the Teradata Data Warehousing business. The company has requested a favorable tax ruling from the Internal Revenue Service regarding the proposed tax-free distribution of NCR's wholly owned subsidiary that will own the assets and liabilities associated with the Teradata Data Warehousing business. In addition, NCR anticipates that it will file its initial registration statement, or Form 10, with respect to the spin off with the Securities and Exchange Commission (SEC) in the second quarter of 2007, both important milestones in completing the strategic separation as currently anticipated by the end of the third quarter of 2007.

Operating Segment Results

Teradata Data Warehousing

NCR's Teradata Data Warehousing segment reported first-quarter revenue of $358 million, a 10 percent increase from the first quarter of 2006. The year-over-year revenue comparison included 2 percentage points of benefit from currency translation.

First-quarter operating income of $65 million was slightly lower than the $67 million reported in the first quarter of 2006. Although Teradata drove higher revenue in the first quarter of 2007, the year-over-year operating income comparison was affected by an unfavorable revenue mix comparison, increased investment in sales and demand-creation resources, as well as an increased legal reserve related to a 2002 matter in China. The first quarter of 2007 included a higher-than-usual mix of hardware revenues, while the first quarter of 2006 included a higher-than-usual mix of software revenue.

Financial Self Service (ATMs)

The Financial Self Service segment generated first-quarter revenue of $312 million, a 20 percent increase from the first quarter of 2006. The first-quarter year-over-year revenue comparison included 4 percentage points of benefit from currency translation. Strong revenue growth in Europe and Asia outpaced a revenue decline in the Americas region and led to the year-over-year revenue increase.

Operating income of $28 million improved from $13 million reported in the first quarter of 2006. Higher revenue significantly outpaced the cost of operating two manufacturing facilities in Europe as NCR initiated its manufacturing realignment in the first quarter of 2007.

Retail Store Automation

Retail Store Automation reported revenue of $155 million, down 10 percent from the first quarter of 2006. The year-over-year revenue comparison included 2 percentage points of benefit from currency translation. Although Retail Store Automation's revenue mix continues to improve, with a higher mix of self-service technologies, the timing of both traditional point-of-sale (POS) and self-service transactions resulted in lower revenue and profitability in the seasonally weak first quarter. Operating loss of $10 million increased from a $7 million operating loss in the first quarter of 2006.

Customer Services

Customer Services revenue of $437 million increased 4 percent from the $419 million recorded in the first quarter of 2006. The first-quarter year-over-year revenue comparison included a 2 percentage point benefit from currency translation. NCR continues to be successful in increasing the mix of revenues from the service of NCR-branded products while reducing lower-margin revenues associated with servicing third-party products. Revenues from the maintenance of ATMs increased 10 percent in the first quarter, while revenues from the maintenance of third-party products declined by 8 percent.

Operating income improved to $28 million from $20 million generated in the first quarter of 2006. The year-over-year comparison benefited from higher revenues, the improving revenue mix and continued emphasis on cost reduction.

Other Items

As stated earlier, NCR incurred approximately $46 million of costs associated with the realignment of its manufacturing facilities. These costs primarily included severance and other benefits related to the realignment. Additionally, the company incurred approximately $2 million of legal and consulting costs associated with the proposed strategic separation of the Teradata Data Warehousing business from NCR.

Included in the results was $3 million of Other Income, consistent with the $3 million of Other Income reported in the first quarter of 2006.

NCR's tax rate in the first quarter of 2007 was 24 percent versus 18 percent in the year-ago period. The year-over-year difference in tax rates was driven by profit and losses by country in the seasonally weak first quarter.

Cash Flow

For the first quarter, NCR generated $151 million of cash from operations, a $139 million increase from the prior-year period, driven by an improvement in working capital and the timing of 2006 year-end transactions. Capital expenditures in the first quarter of 2007 increased to $53 million, compared to $35 million of capital expenditures in the year-ago period. Capital spending increased due to planned manufacturing and real estate initiatives and increased investment in software development. NCR generated $98 million of free cash flow (cash from operations less capital expenditures) in the first quarter of 2007 versus using $23 million of cash in the first quarter of 2006. NCR expects free cash flow in 2007, excluding the cash used in the company's manufacturing realignment and strategic separation, to increase to approximately $425 million, as a result of higher operating income and the timing of working capital items between 2006 and 2007.

Balance Sheet

NCR ended the first quarter with $1.08 billion in cash and cash equivalents, a $133 million increase from the $947 million balance as of Dec. 31, 2006. As of March 31, 2007, NCR had short- and long-term debt of $307 million, the same as of Dec. 31, 2006.

2007 Outlook

NCR is increasing its 2007 earnings guidance by $0.05. Including the special costs included in the first-quarter results, 2007 GAAP earnings per share are now expected to be $2.28 to $2.38. Excluding these costs included in the first-quarter results, as well as additional costs associated with the manufacturing realignment and the proposed spin off of the Teradata Data Warehousing business anticipated later in the year, earnings are expected to be $2.50 to $2.60 per share.

NCR now expects to generate 3 percent to 4 percent year-over-year revenue growth in 2007.