Good morning and welcome to the NCR Corporation Second Quarter Earnings Call. At this time all participants are in a listen-only mode until the question-and-answer period. (Operator Instructions). As reminder this conference is being recorded. If you have any objections you may disconnect at this time. I would like to turn the meeting over to Vice President of Investor Relations, Mr. Gregg Swearingen. Sir please begin.

Thank you, Marilee, and good morning everyone. Thanks for joining us for our 2007 second quarter earnings call. Bill Nuti, NCR CEO will lead our conference call this morning, and after Bill's opening remarks, Mike Koehler, Senior Vice President of Teradata, will discuss Teradata's results. Then Bill will provide comments on NCR's total company financial results and our guidance for the full year, as well as a brief update on the Teradata's spin-off. Also in the room this morning are Bob Fishman, Interim CFO for NCR and Bob Young, Interim CFO for Teradata. Our discussion today includes forecasts and other information that are considered forward-looking statements. While these statements reflect our current outlook, they are subject to a number of risks and uncertainties that could cause actual results to vary materially. These risk factors are described in NCR's periodic filings with the SEC and our annual report to stockholders. In today's call, we will also be discussing certain non-GAAP financial information, such as free cash flow and results excluding the impact of pension and other non-operational items. Reconciliation of non-GAAP financial results to a reported and forecasted GAAP results and other information concerning such measures are included in our earnings release and are also available on the investor page of NCR's website. A replay of this conference call will be available later today on our website at ncr.com. For those listening to the replay of the call, please keep in mind that the information discussed today, is as of July 31, 2007, and NCR assumes no obligation to update or revise the information included in this conference call, whether as a result of new information or future results. I would now like to turn the call over to Bill.

Thank you, Gregg, and good morning, and thanks to all of you for joining us today. Overall, I am pleased with our second quarter operating results, with regard to also both revenue and earnings. Especially, given all of the activities surrounding our strategic separation, which is keeping us very busy. I will provide more details on the spin-off of Teradata later, but first, I would like to review a few of the key operational highlights from the quarter. We delivered our third consecutive quarter of 5% year-over-year revenue growth, led by financial self service, with 11% growth and Teradata data warehousing, which grew 9% and customer service, which delivered its fifth consecutive quarter of revenue growth. Before Mike reviews Teradata’s results in greater detail, I will provide some commentary on the NCR business units. Our Financial Self Service team had a good quarter, delivering revenue of $380 million, which was 11% higher than ATM revenues in the second quarter of 2006. Revenue growth in this segment was aided by four points of currency translation. We experienced revenue growth in all three regions, led by strong growth in the Asia-Pacific region. Q2 non-pension operating income was 47 million, which favorably compared to 31 million in Q2 2006. Operating margin improved to 12% in the second quarter of 2007, from 9% in the second quarter of 2006. In addition to delivering good Q2 operating results, we also made progress in our manufacturing restructuring project. During the quarter, we continued to transition manufacturing operations from our Dundee, Scotland plant, to our lower cost manufacturing facility in Budapest. The vast majority of ATM production for the EMEA region is now being done in Budapest. In the Americas, we continued our work with Selectron, to ensure smooth transition of manufacturing from our plants in Canada,…

Thank you Bill, and good morning everybody. The Teradata team is very excited about the upcoming spin-off and I'm pleased that the team delivered on another good quarter. Revenue of $433 million was up 9% versus a strong second quarter in 2006, in which we generated 11% growth. We had growth in each region, with revenue growth being especially strong in the Asia- Pacific-Japan region. Teradata’s operating profit of $92 million, improved from $86 million in Q2 '06. NPOI’s margin of 21% in the quarter was a little lower than we would have liked, due to a higher mix of professional services revenues and more business coming from outside of the US. We are on-track to achieve the lower end of our NPOI target range of 22% to 23%. We are growing our professional services revenue at a faster rate than the other revenue components in Teradata. Growing the professional services business is a key part of our long-term growth strategy. But keep in mind, this revenue has a lower margin than our software, hardware and support services revenues. In Q2 '07, we also invested $9 million more in demand creation than in Q2 '06, which also impacted margin expansion. If you look at our business by industry segment year-to-date, we are seeing strong growth in the manufacturing, travel and transportation and the communications industries. As an example, with progress in growing industries specific solutions we announced a partnership with Agilent Technologies in May, which will combine Agilent's applications and expertise in the network operations side of the telecommunication providers with the strength of Teradata. This is an example of expanding our opportunities in a vertical where we already have high market penetration by providing a new Teradata solutions with an Agilent that leverages larger data sets in the network…

Thank you, Mike. NCR’s total revenue of $1.61 billion grew 5% year-on-year, including a 2% benefits from currency translation. We reported GAAP net income of $98 million, or $0.54 per share. However, we did have some special items in the quarter. First, we had $12 million of non-recurring costs related to the upcoming spin-off of the Teradata business. Second, we took a $7 million net charge associated with the Fox River environmental matter, as a result of an increase in our estimate of the overall costs and our share of those costs. And third, we included an $18 million net-tax adjustment related to prior periods. The negative impact of these items was reduced by the release of $11 million of the reserve we took in Q1 related to our ATM manufacturing realignment. As the cost is now expected to be lower than previously anticipated due to unanticipated voluntary terminations and actual severance being less than we expected. The net after-tax result was $21 million of special charges. Hitting our P&L were approximately $0.11 per share. The spin-off in manufacturing items was recorded above the operating line, while the Fox River item was in the other income and expense line. Excluding these items non-GAAP EPS was $0.65 per share which compared to $0.42 per share in Q2 2006. As anticipated we had pension expenses of $11 million in the quarter, which compared to $35 million in the second quarter of 2006. Pension expense is lower in 2007 versus 2006 due to the actions we took last year. To analyze NCR's operational performance without the effect of the special items and pension expense, please see the supplemental financial schedule on the investor page of our website that reconciles GAAP to non-GAAP results. For the remainder of my comments during today's call, I…

Thank you. (Operator Instructions). Our first question is from Matt Summerville, KeyBanc. Your line is open.

Good morning, couple of questions. First, I guess Mike, can you maybe talk about, you've obviously and continue to make substantial investments into demand creation. And I guess at what point do we start seeing traction from those investments and I guess how much do you think the people that you've added recently to that organization can add to the overall sales trajectory in the company.

Yeah Matt, we've been systematically been adding demand creation head-count into the business and a couple of key buckets, one of them in the financial services industry and other in the manufacturing industry, then on a geographic basis, some of the high growth international markets. And I think we're starting to see some early signs of the picked up in there as evidenced in some of the strong results we're reporting in the manufacturing industry segment as well as some of the good growth we're seeing internationally. But as far as looking at some longer-term type of guidance in this area, we'll be discussing this in more detail at the road show.

Okay, and then just another quick question, Mike. Can you try and quantify the magnitude of the shift that you've seen in the product mix in that business to professional services and then I guess how long do you expect that to sub-optimum mix or less optimal I should say, mix to last?

Well, as I said earlier Matt, what we've seen, we saw a shift in mix between the U.S. and international. And in international we have a higher percent of content coming from PS in the revenue mix. So, part of that was coming from the strong growth we're seeing in international. As we move on throughout the year, we'll be seeing a more normalized mix towards the end of the year, as the U.S. revenues as a percent of our revenue get back to a more normalized mix, with the international revenues. And also, as we see more capacity upgrades towards the end of the year. The capacity upgrades come with less PS content than do new customers or some of the new solutions that we have been adding to our solution portfolios, that it does have more PS content upfront.

Alright, thank you. That was very help. Bill, maybe then you can comment just on how the overall order book looks in the ATM business. And I guess growing year-to-date in the mid-teens range all in that business I guess. Is your guidance just conservative, or is there something you are seeing out there in the marketplace that causes you perhaps a little bit of pause? And then the strength you are seeing in Asia, how sustainable is that, and maybe then just comment on RFP activity in the U.S. around check-in and deposit automation? I know that's a lot of questions Bill.

It's, okay, Matt. The order book remains healthy. I was pleased with the order book in Q2 and pleased with the trajectory, with the outlook so far. I would say that as you look at the business going forward, the purpose of the guidance was one, to make sure we were being reasonable with respect to what we see today and the expectations of the business. But we are only a half year into '07. So let's see how Q3 works out, and we'll be back to you in Q4. Right now, however, I think we've given you our best estimate of what we think the business can produce this year. In terms of deposit automation, we continue to have success in the pilots that are out there, that are moving more to production in the U.S. We expect to see a pick up in deposit automation generally starting in early '08 and throughout the first half of '08 and then into '09. I would say that the maturation of the technology of the customers experience in their education, as well as third parties, like cash management services companies are improving everyday and the availability of our platforms are improving everyday. So, we feel very good about where we stand today, in deposit automation and what the outlook is for '08 and '09.

Okay. Just two other quick questions and then I will get back in queue. Your overall second half EPS guidance relative, if you – I take the midpoint of your $2.55 to $2.65 and look it kind of where you land it first half and what that implies for the second half. You are only looking at about 6% EPS growth, second half '07 versus second half '06, just a little help reconciling that? And then can you give us more specific guidance on pension expense in the third and fourth quarter, how that should flow through?

Yeah, let me start with pension expense guidance. We do expect the pension expense to be a little bit higher in the second half as I mentioned earlier. And with respect to the overall guidance, we feel good about the second half right now Matt. And so, as I sit here today with everything going on in the company vis-à-vis the separation and our performance year-to-date, I think we are being prudent in our approach to giving guidance and feel pretty good about the trajectory of the business in Q3-Q4.

Great. Thanks a lot, guys.

Next question is Richard Farmer, Merrill Lynch. Your line is open.

Thanks. First, a follow-up on Teradata for Mike. On the margin, do you have better than expected revenue in the quarter though margins at least on our model were about in line. Looking incrementally, your margins both year-over-year and sequentially, incremental margins were about 26%, and, of course historically, the business can have near 50% incremental margins. I heard you mentioned the demand creation and the mixed professional services. But, I guess the question is going forward when should we expect this business might return to something like 50% incremental margins, or should we think of that's really pretty far often that the emphasis from here is going to be on growth and investments for growth in the foreseeable future?

Yeah. Richard, this is something we'll be talking about longer-term, as we look out for the business at the road show. I think the comments I made earlier relating to the first half of the year is, we did increase our demand creation expense in the quarter, I think it was $9 million. And we also had an unfavorable mix with PS and revenue outside the U.S. compared to the U.S. So, these were some of the drivers in the first six months, and our guidance remains the same for the year.

Okay. And I think you touched on it a little bit, but given the strength in the revenues in Teradata, especially on a tough compare good 9% growth. Just wondering why you didn't raise revenue guidance, is there some lumpiness of signings that work there? It sounds like the health of the Teradata pipeline is pretty strong, but just anything you can give to help us understand why you wouldn't raise your outlook there given the good revenue growth?

Well, the first six months have been good, and we have a long way to go and a lot of work to do over the next six months and we feel good about our revenue guidance of 7% to 9%.

Okay. Switching gears if I could. For Bill, any comments on ATM pricing and any expectations on pricing embedded in your guidance?

Yeah. No change, I would say, Richard, which is the good news, quarter-on-quarter, pricing appears to be under control in the market, in most of the major markets as I mentioned last quarter or the last several quarters. We do, however, continue to see some pricing pressure in the high growth emerging markets out there, be it Eastern Europe, China or India. And, so I would just say pretty much a status quarter-to-quarter in terms of the pricing landscape.

Okay. Thanks. And just finally two quick questions on cash flow. The cash from operations was down year-over-year, not as strong as the profit growth. I heard you mention the severance and I think some timing factors. Just wondering if you can give any color on going forward, should we expect the free cash flow to be more similar or even higher than the rate of earnings and any color on the factors that are influencing that? And then, also just on pension, with respect to cash, specifically, you’ve given detailed guidance for the accruals for pension. But what should we think will be cash used for pension and also been sort of in '07, '08. Thanks.

Yeah. Richard, I will give some color on the free cash flow numbers in the quarter and then I will pass it over to Bob to give you a perspective on guidance, both with regard to cash flow and pension throughout the rest of the year. I will make a quick comment on pension before I shoot it over to Bob. On free cash flow in the quarter, obviously higher severance and the timing of certain transactions were an impact to our free cash flow in the quarter and working capital was also an impact. Now part of that is a good news story and that we had higher revenue than expected and are obviously out looking higher revenue than expected, so we kept our inventories higher. The other aspect of inventories and working capital that Nick does in the quarter is the fact that we were still undergoing the manufacturing restructuring and the change from Dundee, Scotland to Budapest, Pondicherry and Beijing, so we were carrying in some cases more inventory than needed as we were making the shift throughout the quarter. So, it’s a case of pros and cons with regard to working capital, one area that we will get focused on is a cash receivable because the timing of certain accounts receivable transitions also affected us. I think it's more of the short-term issue frankly myself. Let me now throw it over to Bob, he will give you a quick perspective on guidance for cash flows and one thing I want to reiterate and I think it was a question earlier was that pension will be slightly higher in the second half more so in the third quarter than in the fourth quarter. So, with that Bob why don't you take that.

I can go ahead Bill and see if I can add a little bit to the response. Previously we had cash flow guidance out there at $425 million free cash flow for the year. We are sticking to that free cash flow number of 425. Internally, here we really think of the number including a number of the one-time items like the spin-off cost and the manufacturing realignment cost. So, including those amounts which will impact free cash flow will really add a 325 number. So, that really gives the full year picture and then again I wasn't sure if there were some other parts to your question.

Yes, just on pension the expectations for cash used as opposed to your accruals which you have already detailed guidance for?

Yes, we again sticking to our $100 million of cash used for pensions for the year.

Okay. Thanks very much.

Okay.

Thanks Richard.

Our next question is from Kartik Mehta, FTN Midwest. Your line is open.

Hi, good morning. Bill, I had a questions on the ATM side of the business I think earlier is that the Asia-Pacific region was fairly strong for you, but you are still seeing little bit of pricing pressure in Asia-Pacific, would that imply that maybe you only went after a deal that where you thought or the pages to you or is it just on part the world where you feel like you have to have some market share because if the market grows you want to service things out of the business which is much higher margin.

No, actually, I have been very pleased Kartik with the discipline of the organization on pricing and that which is the four corners of the world including Asia, and interestingly our margins in Asia are actually near or as good as they are in some of the mature Western European and U.S. based market. So, we have been very disciplined in terms of what we will go after and what we will not and I think the team is doing a much better job of selling our value proposition in those markets.

So you sit today and you look at the fundamental of the ATM industry I think you earlier said that you saw deposit automation in the U.S. kind of picking up in '08 going into '09, and then you look at the world over kind of emerging market than other market, does it seem possible that ATM revenue growth you are seeing now is a sustainable revenue growth at least for the next couple of years as fundamentals are relatively stable and maybe strong?

Yes, much like Teradata is going to be going out on a road show Kartik, so will I probably in the October timeframe. I will be out there talking to you and I will give both the NCR business model update at that time including what we expect our longer term guidance to be in this space.

And then customer service the improvement in margin you are making a lot of progress here, is this the result of taking customer service business bid for ATM or retail away from third parties and brining it into NCR, is that the result of less pricing pressure? Or as you are seeing a combination of both that helping you do better in this segment?

Yeah. It's three things, but you are right to point out, we've got both a little bit of growth going for us and equally we are working hard in our Phase II initiatives that I talked about two years ago, actually two years this week on Phase II initiatives and in Customer Service. So that's a nice way of saying, we're really going after productivity gains without aquis impacting higher customer sec, which is actually one of the factors I think that's helping us to win back some business. But if you take a look at what's going on in terms of growth, we are winning back certain opportunities and certain service contracts that we were not winning a few years back. Our attach rates and capture rates continued to be on the rise in the market. We are also winning back some opportunities we lost to third parties and/or competitors at that time. Now, let me moderate that a bit by saying, we have a long way to go to achieve our goals in this area above the kinds of attach rates we'd expect and the kind of market share we would expect to win in services. Secondly, while we have been re-tooling the service organization operationally, it's really been focused on longer-term cost structure containment and sustainability, but also customer satisfaction. What can we do to improve our productivity but also increase our customer satisfaction quotient, which is the third thing we are getting, there are higher service levels this year than last. The service level improvements have translated into higher customer confidence and I think that helped us to do point one, which is to win back some of this business.

Okay. And last question, Bill, you talked a little bit about the retail business, you said in your opening remarks you are little bit dissatisfied with the growth rate of the traditional business but the self-service business as well. Is there an opportunity, and I am not sure if this is possible, but is there an opportunity to divest a traditional business and just focus on the self-service business, or do you need the entire solution, so you can win the self-service business?

Yeah. We do need the entire solution today because most of our retail customers buy point-of-sales solutions that included assisted and unassisted technologies. Having just one versus the other puts us at a disadvantage in the market competitively, in terms of the end market. I would just add to that comment by saying, it remains our goal, however, to continue to improve the mix of revenues to be more self-service, as customers are also using more self-service technologies as a matter of service their end users, the consumer. So, we will continue to look at opportunities to expand the solution portfolio of self-services technologies we sell into retail. We're currently working along those lines while also looking to expand the solution set that we offer in new industry verticals that are of interest to us that we're going to be working hard to go after like travel and entertainment, hospitality and gaming, healthcare and public sector.

Thank you very much.

Thank you.

Our next question is from Reik Read, Robert W. Baird & Company. Your line is open. Reik Read - Robert W. Baird & Company: Hey, good morning. Bill, with respect to the ATM area, you guys had talked about mix weighing on margins and I guess the assumption is that with the Asia Pacific being strong, that that was the margin mix issue. Is that current, and if it is, can you give us some understanding and reconcile it with your previous comments that a lot of those Asian margins are pretty good and equal to other parts of the business?

Yeah, nonspecifically Asia but the way I would characterize it for you Reik is, the international basket of revenues generally is lower margin than the domestic basket of revenues. And depending upon what country you go to that changes. So, overall as the mix for international business is higher as a total component of revenue, you are going to see a little bit of margin pressure by virtue of that. However, I want to just come back to the point I made earlier, which is we are very focused on doing business at the right profitability quotient and I think we have good controls in place to ensure that we are not out there buying market share. We are not going to go do that. We don't need to that, particularly when the company is at a time of gaining strength, both with its product portfolio and service capability. That being said, as the U.S. market, in particular, strengthens and we hope that that is the case over the next few years with deposit automation coming that should provide us with an opportunity to stabilize, in fact possibly even grow the margin. Reik Read - Robert W. Baird & Company: The international margins, is that primarily result of the pricing that's out there, or is there another factor involved?

No, I think it's a combination of technology adoption. A lot of customers in emerging markets buying cash dispenses only today versus more complex solutions versus the pricing environment. I have seen good discipline on the part of the competitors in this space. Reik Read - Robert W. Baird & Company: Okay. And then with respect to Europe in the deposit automation, trends that are happening over there. Can you comment on that as well and maybe talk a little bit about the margin profile there?

Yeah. As you know, it is different by country in terms of deposit automation in Europe. So, we are well ahead actually in terms of deposit automation in Europe generally, that would be Western Europe. And in fact our largest deposit automation customer in the world is in Europe. And I would say Western Europe certainly has been and continues to be driving more to the ATM, more transactions and more volume to the ATM beyond cash dispense and even deposit. There is now other types of applications being deployed at the ATM that are self-service oriented as well. And Eastern Europe, Africa, Middle East, those components of what we have built into our EMEA structure, I would say depending upon country, it’s a very different mix of source, everything from people just getting into the space and putting cash dispensers in place and from a technology adoption curve, not unlike what we saw in the U.S. many years ago or in Western Europe many years ago, two other countries that are attempting to leap frog putting more fully function devices in place. Reik Read - Robert W. Baird & Company: Okay, and then with respect to Europe, can you just talk about the stage of the duplicate cost, you mentioned that majority of the manufacturing is being done in Budapest when we will you be done with these shutdowns?

Well, I think you can expect just to remain on the schedule, we have been communicating the year all along which is we really do expect by the end of this year to complete the manufacturing realignment project and be ready to have a fresh start in 2008. Reik Read - Robert W. Baird & Company: Okay, and then on the customer service side of things, you did talk about the attach rates, can you just give us a sense maybe quantify where from they are now or at least give us a sense for you said you are pretty happy with the improvement, you are seeing the good growth there, give us a sense for where they were?

Yeah, I mean what I would say is that attach rates generally over the last few years are up double-digits, low double-digits for us. But we probably have a good ways to go in that regard. I would say another double-digit improvement over the next few years would probably put us in a position where at market and where we expect to be. Reik Read - Robert W. Baird & Company: Okay, and then just again in customer services, how much third-party product revenue do you guys have as part of that portfolio? And how would you expect it to trend from here?

Well, they remains diminimus, it will continue to be diminimus in areas of third-party revenue that do not drive profit. We do not drive meaningful profit to the company. You saw a little bit of a tick-up in Q2 of third-party revenues but these are the good third-party revenues that you want. Typically, in the networking space where we actually do service for networking companies like Cisco Systems and in essence you are looking at the field engineer going out and working on routers and to our switches that are in place of that today, that actually translate. That hardware we sell translates into a service contract on the backend that has double-digit margins. So if you do see third-party picking up it's in those areas where we really wanted to versus not. Reik Read - Robert W. Baird & Company: So, from an absolute dollar standpoint we wouldn't expect a whole lot of change but there will be some adjusting in the portfolio?

Yes, that's a good character. That's right. Reik Read - Robert W. Baird & Company: Okay. Great. Thank you much.

Thank you, Reik

(Operator Instructions). Our next question is from Gil Luria, Wedbush Securities. Your line is open.

Good morning.

Good morning.

A couple of questions on the ATM business. First of all, what you are doing to manage the risk then handing off the manufacturing to Flextronics? Has there been any change in the approach since they bought Selectron that you were working with them originally? Is there any chance that there is going to be increased overlap and increased additional cost in the second half?

No shot at additional cost in the second half that I am aware of and actually Flextronics has done a nice job so far. I give their management team credit, but I also think that there is still a bit of a hands-off until that deal is finalized. So, my guess is Selectron's is still running themselves as Selectron. You should know we have people on the ground in those plants. NCR badge people, manufacturing engineers working every single day hand-in-hand with Selectron engineers, making the improvements necessary to have success with regard to the transition to an outsourced model. Equally they have people working with us. So, I would say, generally throughout the rest of the year, I would hope that the success we have had to-date continues, but we are hedging our bets by making sure badged NCR people are working very, very tightly with Selectron to get this model right.

Got it. Now men in services seem to be coming up more these days. It seems to be more of an area of focus. Is there already a meaningful portion of your ATM revenue? Can you quantify that as it's becoming more meaningful?

It is becoming more meaningful, Gil. We have had good success on the managed services side and our scale helps us in this regard in WCS. We have 12,000 people in that organization or thereabouts on a global basis and that really does help us to deliver a full set of value added services beyond break fixed. And so we are seeing customers more interested in managed services and in particular when I say managed services, these are customers out tasking to NCR, things like their helpdesk, incident management of their ATM estate, cash management services and those types of features and functions. And over time, I think you will see more of a dependence on companies like NCR to do that versus not, so the trend is improving and overtime as we begin to talk to you about the new NCR on the road show, we will potentially be breaking out the service revenue for you in that way, so you can get a snapshot of how we are doing in terms of the managed services base.

Great. In terms of deposit automation, one of the big rollouts right now, think of America and the U.S., they’ve already said they rolled out 2,500 ATMs that have module and they are going to transition all of their 12,000 ATM that receive deposits to that kind of a module. And that’s a very large chunk of the market. What’s your participation then in terms of the rollouts so far and do you expect it to increase as you guys they get through the rest of their 12,000 ATM?

Yes, we certainly have our fair share of the market share of deposit automation capable ATMs today. And we are working with those and several other banks that you have not mentioned in this area, both large and small. If you think about the U.S. market in general though there were about 150,000 bank ATMs and I would expect over the next few year's that 50% of that estate will transition to deposit automation capable. Now I could be wrong by 10 or 20 points on either side of that equation, but that would be my current best guestimate. So we are very much still so on the early innings of that process and again I expect '08 and '09 to be the years where banks really began to invest and deposit automation. In particular in that state of bank-owned ATMs.

Got it. And then just on the retail business. In last quarter you spoke of large federated contract; was that all delivered in the second quarter? Is that some of the large business that you were describing for the second half?

Yes, it's part of it, the federated and we also won another opportunity with a very large retailer this past quarter equal to that of Federated, they will both begin to rollout in the second half and it will probably take multiple year's before they are completed, probably two to three year's.

So, none of that Federated business came in, in the second quarter?

A little bit did, but it was not meaningful or material.

Great, thank you very much.