Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

Overview

As more fully discussed in later sections of this MD&A, the following were the significant events for the third quarter of 2008:

• Revenue growth driven by increases in all regions: Americas; Europe, Middle East and Africa (EMEA) and Asia Pacific and Japan (APJ);

• EMEA and APJ regions experienced improved gross margin performance period-over-period; and

• NCR continued organizational realignment and business process improvement initiatives and recorded $12 million of realignment costs.

We continued our focus in the quarter on our strategic initiatives to increase operating income and provide maximum value to our stakeholders. The initiatives and the actions we are taking are as follows:

1) Drive profitable growth - We expect to invest in sales and other demand creation resources in areas with the greatest potential for profitable growth, such as self-service technologies, including self check-in/out and other self-service solutions. We continue to broaden the scope of our self-service solutions for our existing customers and to introduce these solutions into newer industry-vertical markets, such as travel and hospitality, healthcare, entertainment and gaming, and public sector. For the first nine months of 2008, we made investments relating to our entertainment and financial solutions portfolios. We continue to expect to make acquisitions and investments that we believe will increase our market coverage and enhance our existing solution offerings.

2) Strengthen competitive position - The Company expects to focus on increasing the efficiency and effectiveness of our core functions and the productivity of our employees. Areas of emphasis are expected to include product development, manufacturing and supply chain, customer services delivery and our overall management system. In 2007, we completed the ATM manufacturing realignment program. As of the end of the first quarter of 2008, the Company had also completed the majority of the activities related to its realignment program in Japan. The Company has been successful in executing these realignment programs, as planned, and is realizing the full program benefits beginning in this year. During the third quarter of 2008, we continued the organizational realignment and business process improvement initiatives that we had started in the second quarter of 2008 to address unbalanced resource allocation and legacy process inefficiencies. Refer to "Restructuring and Re-engineering" in this MD&A for more information regarding our realignment initiatives.

3) Evolve to a more customer-focused, high-technology culture - We continue to focus on the traits and competencies necessary to enable us to deliver profitable growth and strengthen our competitive position. This will be accomplished through organizational and people development, management system changes and alignment, and a stronger linkage between compensation and performance. On January 1, 2008, NCR began management of its business on a geographic basis, changing from the previous model of global business units organized by product and service offering. The new organizational model is delivering increased sales productivity and is expected to reduce overall operating costs.

We expect to continue with these initiatives for the remainder of 2008 and beyond, as we refine our business model and position the Company for growth and profitability. Unless otherwise noted, this MD&A excludes information related to the Teradata Data Warehousing business, which is classified as a discontinued operation for all periods presented due to its spin-off from the Company on September 30, 2007.

---

Table of Contents