NCR Corp. Keeps Entertaining

Technology solutions provider NCR Corp. ( NCR - Analyst Report ) will now offer DVD-vending machines to the CD, DVD and video game retailers, as part of its attempt to capture a big share of the DVD-Kiosk market. Retailers will be able to sell movie discs, video games and music CDs through these machines under their own names.

The latest marketing strategy will allow NCR Corp. to free up space in its stores by making more DVD-Kiosks accessible to customers. In this DVD-Kiosks market, NCR Corp. trails the ace Coinstar Inc.’s ( CSTR - Snapshot Report ) Redbox brand. Coinstar operates 22,400 machines at locations including Wal-Mart Stores Inc. ( WMT - Analyst Report ) , McDonald’s Corp. ( MCD - Analyst Report ) and Walgreen Co. ( WAG - Analyst Report ) .

We believe NCR Corp. will be able to capitalize on the growth potential in the DVD kiosk segment. As per market sources, roughly 60% of people borrowing DVDs prefer to do so through self-service kiosks. The DVD kiosk market has ample room for growth, with Adams Media Research predicting $2.0 billion in revenue through 60,000 kiosks by 2014. Adams Media Research is the US media industry's key source of market data and financial analysis on the entertainment, TV, video game and digital media markets.

NCR Corp.’s aggressive target of 10,000 kiosks by this year end and achieving the break-even point in its Entertainment business by fiscal 2011 are encouraging. Additionally, if NCR reaches its DVD kiosk goal for the year, it will be in a better position to tackle competition from Coinstar Inc.

In December, NCR Corp. inked a distribution deal with Warner Home Video, the home video unit of Warner Bros. Entertainment Inc. Under the terms of the deal, NCR Corp.’s Blockbuster Express kiosks will rent Warner Home Video's new movies 28 days after the theater release. We believe the association with Warner Bros. could prove to be a catalyst for NCR Corp.’s retail business.

Despite the opportunity in the DVD kiosk business, we remain somewhat cautious as the DVD business is likely to see growing competition from online streaming. Netflix Inc. ( NFLX - Analyst Report ) leads in this space, and the company’s growing success has resulted in a recent tie-up with Apple Inc. ( AAPL - Analyst Report ) .

Blockbuster also has a heavy debt burden and has filed for bankruptcy, following which the company has decided to shut down 186 stores to reduce its ongoing losses. So NCR’s partnership with Blockbuster Inc. could see some hurdles.

Currently, NCR Corp. has a Zacks #3 Rank, which translates into a short-term Hold recommendation.