ATM-maker NCR sees DVD kiosks as next big business

* Sees entertainment vertical becoming meaningful by 2011

* Sees spending half of 2010 capex on DVD rental kiosks

By Deepti Govind

BANGALORE, June 17 (Reuters) - NCR Corp (NCR.N), which is known for its automated teller machines (ATMs), is aiming to make a business selling self-service DVD kiosks as recession saps demand for its bread-and-butter products.

The company recently joined hands with DVD rental company Blockbuster Inc (BBI.N) and expects to provide about 10,000 DVD rental kiosk units by the end of next year.

"Over the long term, in about 10 years, entertainment has the potential to become as big as finance or retail verticals," said Chief Executive Bill Nuti.

DVD rental kiosks are coming up fast in American neighborhoods as customers find them more convenient and movie rental companies look to cut fixed costs of running retail stores.

No.1 U.S. DVD rental company NetFlix Inc (NFLX.O) cited the growing popularity of kiosks as a reason for its weak outlook when it reported its latest quarterly results in April.

NCR, which is also foraying into other verticals like healthcare and public sector, expects its entertainment vertical to become a $1 billion business five years from now.

Of the company's overall revenue of $5.3 billion at the end of 2008, analysts say the financial segment, which includes ATMs, accounts for more than half and retail self-service kiosks about 40 percent.

CEO Nuti forecast rapid near-term growth in the entertainment vertical, and said he expects it to become a "meaningful and noticeable" part of the business by 2011.

"We've seen tremendous shift in terms of consumers' rental behaviour moving out of the store to DVD rental kiosks, and that number is forecasted to triple between now and 2011," CEO Nuti said.

He added that he saw similar behaviour and dynamics in parts of Western Europe, Asia-Pacific and Australia-New Zealand.

Wedbush Morgan Analyst Gil Luria expects the entertainment segment to add a lot in terms of revenue for NCR, but said the $1 billion goal was a little ambitious.

"That business (entertainment) has a very high risk of not delivering the profits that the company is expecting," said Luria. Thomas Weisel Partners analyst Ajit Pai said, "As a third vertical, its still important." Pai, however, said he was not sure if it was the best vertical to be targeting.

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