News of NCR’s deal to purchase the assets of Netkey is of course an interesting, but not unexpected development. While it is still early, and details have not been provided or leaked beyond the official press release, it is worthwhile to examine what we know and to assess the implications.

NCR has a long history and a longer client list in retail as a result of its core business. After all, NCR once stood for National Cash Register, which dates it somewhat, since the term “cash register” disappeared from the retail lexicon long ago. Today, a cash register is an electronic cash drawer with limited capabilities. The vast majority of retailers of any scale moved decades ago to “POS applications”, which are intelligent, connected and integrated with other core retail systems. NCR, of course plays in the POS space now, and they understand store-level integration as well as anyone. They also play heavily in the kiosk and ATM space, and have significant market share and presumably existing relationships that could be leveraged for additional business. NCR has made other kiosk-related acquisitions in the past, including Kinetics (airports), InfoAmerica (QSR) and Tidel (ATMs). The Netkey deal would position them more solidly in the retail space, where Netkey has garnered quite a few nice kiosk clients. Given that, the deal makes great sense for NCR from a kiosk perspective.

While the Netkey website now refers to itself as “NCR Netkey”, the guess here is that the Netkey brand will disappear completely once the current client base of Netkey is appropriately notified, stroked and otherwise assured that they will be served as well or better than in the past. NCR has learned over the years that it prefers to leverage its own brand and sub-brands rather than integrate the brands of its acquisitions. This is common practice and Marketing 101 for big companies. The structure of the deal, an asset purchase, is similar to the structure of the Tidel deal, in which NCR did not buy the company, but rather the Tidel Engineering subsidiary of Tidel Technologies. This deal structure would appear to leave some element of the acquired company (perhaps any existing debt?) in the hands of Netkey shareholders, although it may merely be the preferred form of transaction for NCR from a taxation perspective.

The fit of Netkey’s kiosk base is obvious. The plans for the digital signage pieces, which Netkey added when it acquired Webpavement in 2007, may be a bit murkier. Given that the NCR headline refers to a solution that includes both kiosk and digital signage capabilities, it would seem that they now own the digital signage assets outright, and plan to go to market with them. However, this leads to a few additional questions that will probably be answered in the coming weeks. First, the NCR site already touts digital signage as an offering, reportedly utilizing Cisco’s solution. If that is the case, is NCR about to change digital signage horses, or go with two entries? One would assume that NCR would make a switch based upon a belief that it hitching up to a stronger, faster horse. Further, if they are going to go exclusively with the Netkey offering, will they limit themselves to combined kiosk-digital signage deals, or attempt to compete in pure play digital signage deals? Will NCR invest in the ongoing development of the digital signage tools, or focus on the kiosk software that it clearly coveted? How NCR spends its marketing dollars post-acquisition will be telling.

Netkey shareholders presumably made a deal that they found to be both timely and palatable. The Netkey team members that I have met are good folks, and hopefully come out of the deal in good shape. NCR added to its arsenal in the kiosk space, and will now grapple with its go-forward digital signage strategy. In any case, this is another brick in the digital signage consolidation wall, as Netkey leaves the ranks of the independents. As long anticipated, both networks and solution providers are now beginning to be rationalized. Having a huge technology company like NCR buy into the space is yet another sign of an industry approaching a critical stage in its development, and that can only be a good thing. There is an argument to be made that this was more of a kiosk software deal than a digital signage deal. Nevertheless, watch for more action in the coming months. Big companies tend to react to the moves made by other big companies.