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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2002

Commission File Number 001-00395

NCR CORPORATION
(Exact name of registrant as specified in its charter)

Maryland 31-0387920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1700 South Patterson Blvd.
Dayton, Ohio 45479
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (937) 445-5000

Securities registered pursuant to Section 12(b) of the Act:



Title of each class Name of each exchange on which registered
Common Stock, par value $.01 per share New York Stock Exchange


Securities to be registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act). YES [X] NO [ ]

The aggregate market value of voting stock held by non-affiliates of the
registrant as of June 28, 2002 was approximately $3.4 billion. At February 28,
2003, there were 96,823,766 shares of common stock issued and outstanding.



DOCUMENTS INCORPORATED BY REFERENCE

Parts I and II: Portions of the registrant's Annual Report to Stockholders
for the year ended December 31, 2002.

Part III: Portions of the registrant's Proxy Statement, dated
March 13, 2003, issued in connection with the 2003 annual
meeting of stockholders.

TABLE OF CONTENTS



Item Description Page
- ----- ----------- ----

PART I


1. Business...................................................................................1
2. Properties.................................................................................5
3. Legal Proceedings..........................................................................5
4. Submission of Matters to a Vote of Security Holders........................................5
4.(a) Executive Officers of the Registrant.......................................................5

PART II

5. Market for the Registrant's Common Equity and Related Stockholder Matters..................7
6. Selected Financial Data....................................................................7
7. Management's Discussion and Analysis of Financial Condition and Results of Operations......7
7.(a) Quantitative and Qualitative Disclosures about Market Risk................................24
8. Financial Statements and Supplementary Data...............................................25
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......25

PART III

10. Directors and Executive Officers of the Registrant........................................26
11. Executive Compensation....................................................................26
12. Security Ownership of Certain Beneficial Owners and Management............................26
13. Certain Relationships and Related Transactions............................................27

PART IV
14. Controls and Procedures...................................................................27

15. Financial Statement Schedules, Reports on Form 8-K and Exhibits...........................27


This Report contains trademarks, service marks, and registered marks of the
Company and its subsidiaries, and other companies, as indicated.



PART I

Item 1. BUSINESS

General

NCR Corporation and its subsidiaries (NCR or the Company also referred to as
"we", "us" or "our") provide technology and services that help businesses
interact, connect and relate with their customers.

Data Warehousing solutions transform information into knowledge, permitting
businesses to respond with programs designed to improve customer acquisition,
retention and profitability. Through the Company's presence at customer
interaction points, such as automated-teller machines (ATMs), retail
point-of-sale (POS) workstations, self-checkout systems, electronic shelf labels
(ESLs), and web-enabled kiosks, Financial Self Service and Retail Store
Automation solutions enable companies to capture and process transaction-based
information. Services are an essential component of each of NCR's complete
offerings, and the Customer Services division is a global leader in information
technology (IT) and services delivery.

NCR provides specific solutions for the retail and financial industries, and
through the Data Warehousing and Customer Services businesses, the Company
provides solutions for industries including telecommunications, transportation,
insurance, utilities and electronic commerce, as well as consumer goods
manufacturers and government entities. NCR's solutions are built on a foundation
of long-established industry knowledge and consulting expertise, hardware
technology, value-adding software, global customer support services, and a
complete line of business consumables and specialty media products.

NCR was originally incorporated in 1884 and was a publicly traded company on the
New York Stock Exchange prior to its merger with a wholly-owned subsidiary of
AT&T Corp. (AT&T) on September 19, 1991. Effective December 31, 1996, AT&T
distributed to its stockholders all of its interest in NCR (the Distribution) on
the basis of one share of NCR common stock for each 16 shares of AT&T common
stock. The Distribution resulted in approximately 101.4 million shares of NCR
common stock outstanding as of December 31, 1996. NCR common stock is listed on
the New York Stock Exchange and trades under the symbol "NCR".

Revenue by similar classes of products and services is reported in NCR's 2002
Annual Report to Stockholders as part of Note 12 of Notes to Consolidated
Financial Statements, "Segment Information and Concentrations," and is
incorporated herein by reference.

Geographic information is reported in NCR's 2002 Annual Report to Stockholders
as part of Note 12 of Notes to Consolidated Financial Statements, "Segment
Information and Concentrations," and is incorporated herein by reference.

NCR operates in one industry, the information technology industry, and
categorizes its operations into seven reportable segments: Data Warehousing
solutions, Financial Self Service solutions, Retail Store Automation solutions,
Customer Services, Systemedia, Payment and Imaging solutions, and Other, each of
which is described below. Each solution generally combines hardware, software,
professional and installation-related services and customer support services.

Data Warehousing Solutions

Products and Services

NCR provides data warehousing solutions, combining Teradata(R) hardware,
software (e.g., Teradata database and data mining software), professional
consulting services, and customer support services, together with third-party
products and services from leading technology partners. NCR's Data Warehousing
solutions help businesses gain a competitive advantage by more quickly and
efficiently analyzing detailed data around customers, suppliers, partners and
company operations, to deliver accurate business intelligence to decision-makers
when and where they need it.

The Teradata products and services are focused on providing customers with
optimum price/performance at minimum total cost of ownership. Teradata data
warehousing technologies provide a high level of linear performance scalability,
availability and manageability for both repetitive and ad hoc queries in a
decision support environment. Our professional service consultants combine a
proven methodology with years of hands-on experience to ensure successful
delivery of customers' data warehousing environments. Our customer services
organization provides on-going maintenance and support, helping customers
achieve and sustain the availability levels they require.

Target Markets and Distribution Channels

NCR's Data Warehousing serves many major industry markets, including the retail,
financial, telecommunications, transportation, insurance, utilities and
electronic commerce industries, as well as consumer goods manufacturers and
government entities.

Data Warehousing solutions are delivered through a combination of direct and
indirect channels. In recent years, over 90% of NCR's revenue from the Data
Warehousing segment have been generated by the Company's direct sales force. The
remaining revenues have historically been generated from the indirect channel
and through alliances with value-added resellers, distributors and original
equipment manufacturers.

1



Competition

NCR faces competition in the industries served by Data Warehousing in all
geographic areas where it operates. NCR believes that key competitive factors in
these markets are vendor experience, the breadth and depth of the customer base,
customer referrals, quality of the solutions or products, database
sophistication, platform scalability, support and professional service
capabilities, industry knowledge of the vendor, and total cost of ownership. The
movement toward common industry standards (such as Intel processors and UNIX(R)
and Microsoft operating systems) has accelerated product development, but has
also made differentiation more difficult. Hardware and operating system
commoditization have extended beyond personal computers into the server
business. In the markets in which Data Warehousing competes, customers require
applications, database software, system software, hardware, professional
services, systems integration skills and ongoing solution support. Many
competitors offer one or two of these components, but NCR believes it is one of
few companies that can provide complete, open solutions that include all of
these customer requirements. NCR's primary competitors include companies such as
International Business Machines (IBM) and Oracle Corporation.

Financial Self Service Solutions

Products, Services and Solutions

Financial Self Service provides ATMs and related software, including the
APTRA(TM) operating system software, to banks, credit unions and retailers.
Financial Self Service solutions are designed to quickly and reliably process
high volumes of consumer transactions and incorporate advanced features such as
web enablement, automated check cashing/deposit, automated cash deposit, bill
payment and the dispensing of non-cash items. Financial Self Service solutions
enable businesses to reduce costs and generate new revenue streams, as well as
enhance customer loyalty.

Target Markets and Distribution Channels

NCR's Self Service solutions primarily serve the financial services industry
with particular focus on retail banking which includes traditional providers of
consumer banking and financial services. Self Service solutions also serve the
retail markets through convenience banking products designed to complement their
core businesses. Self Service solutions' customers are located throughout the
world in both established and emerging markets.

NCR has historically distributed most of its Self Service products and services
through NCR's direct sales channel, although certain revenues are derived
through sales by distributors. Approximately 75% of the traditional Self Service
product and service sales were sold by the direct sales force; the remainder was
sold through indirect channels.

Competition

NCR faces competition in the financial services industry in all geographic areas
where it operates. The primary areas of competition can vary, but typically
include: quality of the solutions or products, total cost of ownership, industry
knowledge of the vendor, the vendor's ability to provide and support a total
end-to-end solution, the vendor's ability to integrate new and existing systems,
the fit of the vendor's strategic vision with the customer's strategic
direction, and the quality of the vendor's support and consulting services.
NCR's primary competitors are Diebold, Inc. and Wincor Nixdorf Gmbh & Co.
(Wincor Nixdorf), but other competitors exist and vary by product and service
offering, as well as geographic area.

Retail Store Automation Solutions

Products and Services

Retail Store Automation provides retail-oriented technologies such as POS
terminals, bar-code scanners and software as well as innovative self-checkout
systems and electronic shelf labels to retailers. Combining retail industry
expertise, software and hardware technologies, and implementation and consulting
services, Retail Store Automation solutions are designed to improve selling
productivity and checkout processes, and increase customer satisfaction for
NCR's retail customers.

Target Markets and Distribution Channels

Primarily serving the retail industry, NCR delivers Store Automation solutions
for the general merchandise, food and drug, and hospitality segments. The
general merchandise segment includes department stores, specialty retailers,
mass merchandisers and catalog stores. The food and drug segment includes
supermarkets, hypermarkets, grocery, drug, wholesalers and convenience stores.
The hospitality segment includes lodging (hotel/motel), fast food/quick service
and other restaurants.

NCR's Store Automation solutions are offered through a combination of direct and
indirect channels. The majority (about 90% in recent years) of solutions are
sold by NCR's direct sales force, with the remainder sold through alliances with
value-added resellers, distributors and dealers. NCR provides supporting
services, including collateral sales materials, sales leads, porting facilities
and marketing programs to the sales channel.

Competition

NCR faces strong competition in the retail industry in all geographic areas
where it operates. The Company believes that key competitive factors can vary by
geographic area but typically include quality of the solutions or products,
total cost of ownership, industry knowledge of the vendor, and knowledge,
experience and quality of the vendor's consulting, deployment and support
services. NCR's competitors vary by market segment, product, service offering
and geographic area, and include IBM, Dell Computer Corporation, Wincor Nixdorf,
and Optimal Robotics Corp., among others.

2



Customer Services

Products and Services

Customer Services are an essential component of NCR's complete solution
offerings. NCR's Customer Services division is a global leader in IT services
delivery. In addition to providing maintenance and support for the base of NCR
solution customers, the Customer Services segment provides services from
consulting to site design, to staging and implementation and maintenance for
third parties, to complete systems management.

As a result of supporting NCR's solutions around the world, Customer Services
has established an unmatched service delivery capability, and has leveraged this
global presence and experience to develop and deliver a comprehensive portfolio
of IT infrastructure services to businesses in other industries. These high
availability services focus on the vital systems, networks, software and
security that comprise the IT infrastructure of today's businesses, and include
operations management, consulting, deployment and maintenance. Customer Services
provides these services directly to global businesses as well as through
partnerships with leading technology, network and systems suppliers including
Cisco Systems, Dell Computer Corporation, Sun Microsystems and others.

Target Markets and Distribution Channels

The target market for Customer Services are users of NCR's world-class
solutions. Customer Services provides service on NCR solutions, as well as
multi-vendor technologies used in these segments - for example, IBM retail
technologies and Diebold self-service products. Customer Services also provides
services to customers who value and leverage NCR's global multi-vendor service
capability - primarily technology manufacturers and large multi-national
companies.

The primary sales channel for Customer Services is NCR's solution sales teams,
which exist in all NCR divisions. Customer Services provides these services
directly to end customers as well as through partnerships with leading
technology suppliers including Cisco Systems, Sun Microsystems, and others.

Competition

NCR faces competition for services from other technology providers, as well as
from service-only firms, in all geographies where it operates. The primary
competitive factors are the same that impact NCR's other business segments. In
addition, delays and declines in technology spending are causing intense
competition for services and support contracts. Also, global technology
providers are becoming more focused on services as a core business strategy. NCR
believes it is well positioned to compete based on its domain knowledge and
leadership positions in the target markets, technical expertise with NCR and
multi-vendor technologies, demonstrated operational performance, and global
reach and experience - all factors that play to the strengths of NCR. Continued
threats include price erosion and service commoditization. To counter these
threats, Customer Services is aggressively pursuing managed service
relationships with its key customers. These services improve the efficiency and
performance of the customers business, and increase the strategic and financial
importance of their relationship with NCR.

The primary Customer Service competitors are the companies identified in NCR's
other solutions. Key competitors encountered across all NCR solutions include
IBM and Electronic Data Systems (EDS). NCR also competes with a range of smaller
regional and local service companies that differ by geography.

Systemedia

Products

Systemedia develops, produces and markets a complete line of business
consumables including paper rolls for ATMs and POS workstations, inkjet and
laser printer supplies, thermal transfer ribbons, labels, ink ribbons, laser
documents, business forms and retail office products. Systemedia products are
designed to reduce paper-related failures and enable businesses to improve
transaction accuracy while reducing overall costs.

Target Markets and Distribution Channels

The major industry segments targeted by Systemedia include general merchandise,
food and drug, hospitality, financial services and consumer goods manufacturing.
Systemedia has a direct sales force in 26 countries focused on providing
solutions to major accounts. In addition, Systemedia products are sold through
office product resellers, value-added resellers, telemarketing and the Internet
(via NCR's TeleWeb initiative).

Competition

Competition in the consumable and media solutions business is significant and
varies by geographic area and product group. The primary areas of competitive
differentiation are typically quality, logistics and supply chain management
expertise, and total cost of ownership. While price is always a factor,
Systemedia focuses on total cost of ownership for all of its products. Total
cost of ownership takes into account not only the per unit cost of the media,
but also service, usage and support costs over the life of the system.

3



Payment and Imaging Solutions

Products and Services

Payment and Imaging provides end-to-end solutions for both traditional
paper-based and image-based item processing. Payment and Imaging solutions
utilize advanced image recognition and workflow technologies to automate item
processing, helping financial industry businesses increase efficiency and reduce
operating costs. Consisting of hardware, software, and consulting and support
services, our comprehensive Payment and Imaging solutions enable check and
item-based transactions to be digitally captured, processed and retained within
a flexible, scalable environment.

Target Markets and Distribution Channels

NCR's Payment and Imaging solutions primarily serve the financial services
industry worldwide with a major focus on banks. NCR has historically distributed
most of its Payment and Imaging products and services through NCR's direct sales
channel, although certain revenues are derived through sales by value-added-
resellers, and distributors. Approximately two-thirds of the traditional Payment
and Imaging product sales in recent years were sold by the direct sales force;
the remainder was sold through indirect channels.

Competition

NCR faces competition in the financial services industry in all geographic areas
where it operates. The primary areas of competition can vary, but typically
include: quality of the solutions or products, total cost of ownership, industry
knowledge, the vendor's ability to provide and support a total end-to-end
solution, the vendor's ability to integrate new and existing systems, the fit of
the vendor's strategic vision with the customer's strategic direction, and the
quality of the vendor's support and consulting services. NCR's competitors vary
by product, service offering and geographic area, and include IBM and Unisys
Corporation, among others.

Other

NCR's Other business segment primarily relates to third-party computer hardware
and related professional and installation services in our high-availability and
networking services businesses and to a business in Japan that is not aligned
with our other segments.

Research and Development

Information regarding research and development activities is included in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," of this Report under the caption "Operating Expenses," and is
incorporated herein by reference.

Seasonality

Information regarding seasonality is included in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," of
this Report under the caption "Operating Result Fluctuations," and is
incorporated herein by reference.

Backlog

NCR believes that backlog is not a meaningful indicator of future business
prospects due to the shortening of product delivery schedules and the
significant portion of revenue related to its customer support services
business, for which order information is not recorded.

Sources and Availability of Raw Materials

Information regarding sources and availability of raw materials is included in
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," of this Report under the caption "Reliance on Third Parties,"
and is incorporated herein by reference.

Patents and Trademarks

NCR owns approximately 1,500 patents in the United States and slightly more in
foreign countries. The foreign patents are generally counterparts of NCR's
United States patents. Many of the patents owned by NCR are licensed to others
and NCR is licensed to use certain patents owned by others. While NCR's
portfolio of patents and patent applications in aggregate is of significant
value to NCR, the Company does not believe that any particular individual patent
is itself of material importance to NCR's business as a whole.

NCR has registered certain trademarks and service marks in the United States and
in a number of foreign countries. NCR considers the mark "NCR" and many of its
other trademarks and service marks to be valuable assets.

Employees

At February 28, 2003, NCR had approximately 29,700 employees and contractors.

Internet Information

NCR makes available through its website, free of charge, its Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and
all amendments to such reports, as soon as reasonably practicable after these
reports are

4



electronically filed or furnished to the U.S. Securities and Exchange Commission
(SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
NCR will furnish, without charge, to a security holder upon written request a
copy of the 2002 Annual Report to Stockholders and the 2003 Proxy Statement,
portions of which are incorporated herein by reference. NCR will furnish any
other exhibit at cost. Document requests are available by calling or writing to:

NCR - Investor Relations
1700 S. Patterson Boulevard
Dayton, OH 45479
Phone: 937-445-5905
investor.relations@ncr.com
http://investor.ncr.com

Environmental Matters

Information regarding environmental matters is reported in NCR's 2002 Annual
Report to Stockholders as part of Note 11 of Notes to Consolidated Financial
Statements, "Commitments and Contingencies," and is incorporated herein by
reference.

Item 2. PROPERTIES

As of March 3, 2003, NCR operated approximately 514 facilities consisting of
approximately 12.1 million square feet throughout the world. On a square footage
basis, approximately 58% are owned and 42% are leased. Within the total facility
portfolio, NCR operates approximately 26 research and development and
manufacturing facilities totaling approximately 3.2 million square feet, 85% of
which is owned. The remaining 8.9 million square feet within the facility
portfolio includes office, repair, warehouse, and other miscellaneous sites, and
is 49% owned. NCR maintains facilities in 68 countries.

NCR's business units are headquartered in Dayton, Ohio (Financial Solutions
Division, including its Payment and Imaging business, Teradata Division and
Systemedia Division) and Atlanta, Georgia (Retail Solutions Division).

NCR believes its plants and facilities are suitable and adequate, and have
sufficient productive capacity to meet its current needs.

Item 3. LEGAL PROCEEDINGS

Information regarding legal proceedings is included in Note 11 of the Notes to
Consolidated Financial Statements, "Commitments and Contingencies," in NCR's
2002 Annual Report to Stockholders, and is incorporated herein by reference.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Item 4. (a) EXECUTIVE OFFICERS OF THE REGISTRANT

The Executive Officers of NCR (as of March 13, 2003) are as follows:



Name Age Position and Offices Held
---- --- -------------------------

Lars Nyberg 51 Chairman of the Board, Chief Executive Officer, and President*
Mark V. Hurd 46 President and Chief Operating Officer*
Earl C. Shanks 46 Senior Vice President and Chief Financial Officer
Wilbert J. M. Buiter 44 Senior Vice President, Human Resources
Gerald A. Gagliardi 55 Senior Vice President, Worldwide Customer Services Division
Jonathan S. Hoak 53 Senior Vice President and General Counsel
Michael Koehler 50 Senior Vice President, Teradata Division
Mark Quinlan 50 Vice President, Systemedia Division
Lee Schram 41 Senior Vice President, Retail Solutions Division
Keith Taylor 52 Senior Vice President, Financial Solutions Division


* Effective as of March 14, 2003, Mr. Nyberg will resign as President and
Chief Executive Officer, and Mr. Hurd will become NCR's President and Chief
Executive Officer.

5



NCR's Executive Officers

Lars Nyberg. Mr. Nyberg has been Chairman, Chief Executive Officer and President
of NCR since June 1, 1995. He has resigned as Chief Executive Officer and
President of the Company effective as of March 14, 2003. He was appointed
non-executive Chairman of NCR's Board of Directors as of that date. Before
joining NCR, Mr. Nyberg held various senior management positions with Philips
Electronics NV, an electronics and electrical products company, including
serving as Chairman and Chief Executive Officer of Philips' Communications and
Computer Divisions. Mr. Nyberg is a director of Sandvik AB and Snap-On
Incorporated. He became a director of NCR in 1995.

Mark V. Hurd. Mark Hurd will become Chief Executive Officer of NCR on March 14,
2003. He is also the Company's President, a position he has held since July
2001. From September 2002 until March 14, 2003, Mr. Hurd has served as NCR's
Chief Operating Officer. From July 2000 until that time, he was Chief Operating
Officer of the Teradata Division and, from July 2000 until July 2001, Executive
Vice President, NCR. Since he started his career at NCR in 1980, Mr. Hurd has
held a series of sales and marketing positions with increasing management
responsibility, including Senior Vice President, Teradata Solutions Group from
1998 to June 2000 and Vice President, Worldwide Marketing and Americas
Professional Services Division, from 1994 to 1998. Mr. Hurd will become a
director of NCR on March 14, 2003.

Earl C. Shanks. Earl Shanks was appointed Senior Vice President and Chief
Financial Officer of NCR in September 2001. Prior to assuming that position, he
was Vice President of Corporate Finance starting in December 1998. From
September 1997 to December 1998, Mr. Shanks was Vice President and Corporate
Controller, and from 1996 to September 1997 he was NCR's Treasurer. Before
joining NCR in 1996, Mr. Shanks was Vice President and Treasurer at Fruit of the
Loom, Inc.

Wilbert Buiter. Wilbert Buiter has been Senior Vice President, Human Resources,
of NCR since August 1, 1998. Prior to joining NCR, Mr. Buiter spent 15 years
with Philips Electronics in a variety of operations, staff and managerial human
resources assignments, including from July 1997 to July 1998, when he served as
Senior Vice President, Human Resources, for Philips Consumer Communications, a
joint venture between Philips and Lucent Technologies Inc.

Gerald A. Gagliardi. Gerald Gagliardi joined NCR as Senior Vice President,
Worldwide Customer Services Division in January 2001. From June 2000 to January
2001, he served as a consultant to E. M. Warburg Pincus & Company, LLC, where he
was engaged in acquisitions in the services industry. From October 1999 to June
2000, he also served as President and Chief Executive Officer of Inacom Corp. In
June 2000, Inacom Corp. filed for bankruptcy protection under Chapter 11 of the
United States Bankruptcy Code. Prior to October 1999, he spent 28 years at the
Unisys Corporation where he held progressively senior management positions in
the company's services division, including Executive Vice President and
President of Global Customer Services from 1995 to 1999.

Jonathan S. Hoak. Jonathan Hoak became Senior Vice President and General Counsel
for NCR in December 1993. Prior to joining NCR, he was general attorney for
AT&T's Federal Systems Division and a partner at a prominent national law firm.

Michael Koehler. Michael Koehler became Senior Vice President of NCR's Teradata
Division on March 4, 2003. Prior to assuming this position, from September 2002
to March 2003, he was the Interim Teradata Division Leader and Vice President,
Global Sales and Services, Teradata Division. From October 1999 to September
2002, Mr. Koehler was Vice President, Global Sales and Services, Teradata
Division. Prior to that, from June 1997 to October 1999, he was Vice President,
Americas, Retail Solutions Group, and from July 1995 to June 1997, he was Vice
President, Marketing, Retail Solutions Group.

Mark Quinlan. Mark Quinlan became Vice President and General Manager of NCR's
Systemedia Division in September 2001. Mr. Quinlan had been the Acting Vice
President of the Systemedia Division since May 2001. Prior to assuming this
position, from 1999 to 2001, he was Vice President, Americas Sales for the
Systemedia Division and, from 1996 to 1999, he was Vice President, Global
Marketing, Systemedia Division.

Lee Schram. Lee Schram became Senior Vice President of NCR's Retail Solutions
Division on March 4, 2003. Prior to assuming this position, from January 2002 to
March 2003, he was Vice President and General Manager, Payment Solutions for the
Financial Solutions Division. From September 2000 to January 2002, Mr. Schram
was Chief Financial Officer of the Company's Retail and Financial Group. Prior
to that, from 1999 to September 2000, he was NCR's Corporate Controller, and
from 1996 to 1999, he was Chief Financial Officer of the Company's Retail
Solutions Group.

Keith Taylor. Keith Taylor has been Senior Vice President of NCR's Financial
Solutions Division since May 2001. Prior to that time, he was Vice President,
Systemedia Group, from August 1999 to May 2001. From 1998 to August 1999, Mr.
Taylor was Vice President, Worldwide Customer Services, Asia/Pacific region.
From 1997 to 1998, he was Director of Logistics for NCR's Worldwide Customer
Services, Europe/Middle East/Africa area.

6



PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

NCR common stock is listed on the New York Stock Exchange and trades under the
symbol "NCR." There were approximately 204,000 registered holders of record of
NCR common stock as of February 28, 2003. The following table presents the high
and low per share sales prices for NCR common stock for each quarter of 2002 and
2001.

2002 2001
--------------- ---------------
High Low High Low
------ ------ ------ ------

1st Quarter $45.59 $36.80 1st Quarter $49.70 $37.50
2nd Quarter $44.90 $33.30 2nd Quarter $50.00 $35.27
3rd Quarter $35.95 $19.35 3rd Quarter $48.65 $28.93
4th Quarter $29.01 $18.80 4th Quarter $39.50 $28.59

NCR does not anticipate the payment of cash dividends on NCR common stock in the
foreseeable future. The declaration of dividends will be subject to the
discretion of the Board of Directors of NCR. Payment of dividends on NCR common
stock will also be subject to such limitations as may be imposed by NCR's credit
facilities from time to time.

From January 1, 2003 through March 12, 2003, the Company repurchased
approximately 2.4 million shares of NCR common stock at an average market price
of $18.69 per share. These repurchases were part of the systematic repurchase
program, which is described in NCR's 2002 Annual Report to Stockholders as part
of Note 8 of Notes to Consolidated Financial Statements, "Stock Compensation
Plans, Purchases of Company Common Stock and Put Options."

Item 6. NCR CORPORATION SELECTED FINANCIAL DATA

The selected financial data for the five years ended December 31, 2002, appears
in the "Selected Financial Data" chart at the end of NCR's 2002 Annual Report to
Stockholders, and is incorporated herein by reference.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

We provide the technology and services that help businesses interact, connect
and relate with their customers. Our market-leading Data Warehousing solutions
transform information into knowledge, permitting businesses to respond with
programs designed to improve customer acquisition, retention and profitability.
Through our presence at customer interaction points, such as automated-teller
machines (ATMs), retail point-of-sale (POS) workstations, self-checkout systems,
electronic shelf labels (ESLs), and web-enabled kiosks, our Financial Self
Service and Retail Store Automation solutions enable companies to capture and
process transaction-based information. Services are an essential component of
each of our complete offerings, and our Customer Services division is a global
leader in information technology (IT) and services delivery.

We provide specific solutions for the retail and financial industries, and
through our Data Warehousing and Customer Services businesses, we provide
solutions for industries including telecommunications, transportation,
insurance, utilities and electronic commerce, as well as consumer goods
manufacturers and government entities. Our solutions are built on a foundation
of long-established industry knowledge and consulting expertise, hardware
technology, value-adding software, global customer support services, and a
complete line of business consumables and specialty media products.

Our key solutions are categorized as Data Warehousing, Financial Self Service,
Retail Store Automation and Customer Services, each of which is a reportable
operating segment. In addition, our Systemedia and Payment and Imaging solutions
are reportable segments. A seventh segment, Other, primarily relates to
third-party computer hardware and related professional and installation services
in our high availability and networking services businesses and to a business in
Japan that is not aligned with our other segments. Our segments are comprised of
hardware, software, professional and installation-related services and customer
support services.

We deliver our solutions to customers on a global basis, and categorize our
results in four regions: the Americas, Europe/Middle East/Africa (EMEA), Japan
and Asia/Pacific excluding Japan (Asia/Pacific).

7



RESULTS FROM OPERATIONS

In millions 2002/1/ 2001/2/ 2000/3/
------- ------- -------

Consolidated revenue $5,585 $5,917 $5,959

Consolidated gross margin 1,587 1,794 1,867

Consolidated operating expenses:
Selling, general and administrative
expenses 1,166 1,315 1,329
Research and development expenses 232 293 333
------ ------ ------

Total consolidated income from operations $ 189 $ 186 $ 205
====== ====== ======

/1/ Income from operations for 2002 includes real estate consolidation and
restructuring charges of $16 million and asset impairment charges of $5
million.

/2/ Income from operations for 2001 includes a $39 million provision for
uncollectible loans and receivables related to Credit Card Center (CCC), $9
million of integration costs related to acquisitions and $67 million of
goodwill amortization.

/3/ Income from operations for 2000 includes $38 million for restructuring and
other related charges, $25 million for in-process R&D charges related to
acquisitions, $2 million for integration costs related to acquisitions and
$33 million of goodwill amortization.

Total revenue decreased 6% in 2002 versus the prior year. When adjusted for the
impact of foreign currency fluctuations, revenue declined 7%. The revenue
decline in 2002 was primarily attributed to lower revenue from exited businesses
and the impact of depressed IT capital spending. This adverse capital spending
environment impacted our Customer Services and Retail Store Automation
businesses while weakness in the European economy and lower upgrade activity
following the Euro conversion on January 1, 2002, specifically affected our
Financial Self Service solutions. These declines were partially offset by
improved performance from Data Warehousing in the Americas and EMEA regions, as
well as the continued success of Financial Self Service in the Asia/Pacific
region. Total revenue declines in 2002 of 8% in the Americas region, 7% in the
EMEA region and 4% in Japan were partially offset by growth in the Asia/Pacific
region of 6%. Adjusted for the impact of foreign currency fluctuations, 2002
revenues declined 11% in the EMEA region and 2% in Japan, contrasted to a 4%
increase in the Asia/Pacific region.

Total operating income was $189 million in 2002 versus operating income of $186
million and $205 million in 2001 and 2000, respectively. In 2002, total
operating income included $5 million of asset impairment charges and $16 million
of real estate consolidation and restructuring charges. Excluding the impact of
prior year goodwill amortization of $67 million, total operating income
decreased $64 million. This decline was mainly due to lower revenue relating to
exited businesses, margin erosion due to competitive pressure, lower product
revenue and the impact of pension and postemployment changes.

In 2001, total revenue decreased 1% compared to 2000, but increased 2% when
adjusted for the impact of foreign currency fluctuations. Revenues reflected
declines from exited businesses and the impact of the slow United States (U.S.)
economy on capital spending, offset by the strength of our Financial Self
Service solutions in the expanding Asia/Pacific marketplace and the EMEA region,
specifically due to higher sales and upgrades relating to the conversion to the
Euro currency. Total revenue declines in 2001 of 4% in the Americas region and
12% in Japan were partially offset by growth in the EMEA and Asia/Pacific
regions of 6% and 9%, respectively. Adjusted for the impact of foreign currency
fluctuations, 2001 revenues increased 9% in the EMEA region and 16% in the
Asia/Pacific region, contrasted to a 1% decline in Japan.

In 2001, total operating income included a $39 million provision for
uncollectible loans and receivables related to Credit Card Center (CCC), $9
million of acquisition-related integration charges and $67 million of goodwill
amortization. In addition to these expenses, the decline in total operating
income in 2001 reflected a lower mix of higher-margin product revenues versus
services revenue and lower customer services margin as a percentage of revenue,
partially offset by a reduction in operating expenses.

Revenue And Operating Margin By Segment

For purposes of discussing our operating results by segment, we exclude the
impact of certain items from operating income, consistent with the manner by
which we manage each segment and report our operating segment results under
Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures
about Segments of an Enterprise and Related Information." Although such
exclusions result in financial information that differs from generally accepted
accounting principles (GAAP) in the United States, it is useful to investors
because it includes the same information that is used by our management to
assess our

8



overall financial performance and the financial performance of our operating
segments. Moreover, this non-GAAP information excludes items that reflect
management decisions made for the long-term benefit of our company overall, but
which may have a disproportional impact, either positively or negatively, within
the reporting period, or exclude events that occur infrequently and therefore do
not reflect ongoing operational performance within the period. The effects of
pension income, goodwill amortization, and other special items as described in
Note 12 of Notes to Consolidated Financial Statements have been excluded from
the operating income for each reporting segment presented and discussed below.
Our segment results are reconciled to total company GAAP results in Note 12 of
Notes to Consolidated Financial Statements.

Data Warehousing provides the market-leading Teradata data warehousing database
software, hardware platform and related services that enable companies to gain a
competitive advantage by more quickly and efficiently analyzing customer
behavior and other business information and then delivering that business
intelligence to the company's decision-makers. Combining computer hardware,
software, professional consulting services, customer support services and
third-party software from leading technology firms, our Data Warehousing
solutions are designed to enable businesses, across multiple industries, to
quickly leverage detailed data into actionable opportunities.

The following table presents Data Warehousing (including hardware and software
maintenance) revenue and total operating income (loss) for the years ended
December 31:

2002 2001 2000
- ----------------------------------------------------------------------
In millions

Data Warehousing revenue $1,226 $1,149 $1,134
Data Warehousing operating income (loss) $ 112 $ (53) $ (60)
- ----------------------------------------------------------------------

Data Warehousing revenue increased 7% in 2002 compared to 2001, outpacing the
industry despite the challenging economic environment. During 2002, Data
Warehousing increased product revenues as a result of existing customers
upgrading their data warehouses and the addition of approximately 100 new
customers. Data Warehousing generated significant year-over-year growth in the
insurance, communications, government and retail sectors. In addition, hardware
and software maintenance revenue increased as a result of growth in our
installed customer base. Data Warehousing solutions experienced revenue growth
in the Americas and EMEA regions, partially offset by declines in the
Asia/Pacific region and Japan. Operating income improved to $112 million in
2002, compared to an operating loss of $53 million in 2001, primarily attributed
to reductions in costs and expenses not aligned to demand-creation activities,
as well as higher product and maintenance revenues.

In 2001, revenue increased 1% despite a challenging economic environment
compared to 2000. This increase was primarily attributable to an increase in
hardware and software maintenance revenue as a result of growth in our installed
customer base. The 2001 operating loss improved by $7 million from 2000 due to a
lower expense structure which was partially offset by a lower mix of
higher-margin hardware and software products, versus lower-margin professional
services.

We expect continued revenue growth in 2003 driven by the ability of our Teradata
business to grow market share despite the depressed IT capital spending
environment. We anticipate that our maintenance revenue will continue to grow as
a result of growth in our installed customer base. This expected growth, when
combined with our continued focus on cost and expense management, should result
in improved operating profitability for Teradata Data Warehousing in 2003.

Financial Self Service provides ATMs and related software, including our APTRA
operating system software, to banks, credit unions and retailers. Our
market-leading value proposition is based on our high-quality ATM product family
which provides a broad array of functionality, our leadership position in
multi-vendor software, and our best-in-class project management services, all
delivered at an attractive cost of ownership. Our Financial Self Service
solutions are designed to quickly and reliably process high volumes of consumer
transactions and incorporate advanced features such as web enablement, automated
check cashing/deposit, automated cash deposit, bill payment and the dispensing
of non-cash items. Financial Self Service solutions enable businesses to reduce
costs and generate new revenue streams, as well as enhance customer loyalty.

The following table presents Financial Self Service revenue and total operating
income for the years ended December 31:

2002 2001 2000
- ---------------------------------------------------------------------
In millions

Financial Self Service revenue $1,095 $1,114 $1,077
Financial Self Service operating income $ 115 $ 168 $ 143
- ---------------------------------------------------------------------

Financial Self Service revenue decreased 2% in 2002 compared to 2001. The
revenue decrease in 2002 was driven by a decline in the EMEA region, partially
offset by increases in the Asia/Pacific and Americas regions. The revenue
decline in the EMEA region was attributed to economic weakness and competitive
pressure in Europe. Additionally, there were fewer upgrades and purchases of
equipment in 2002 versus higher levels of upgrades in 2001 as financial
institutions prepared for the January 1,

9



2002 conversion to the Euro currency. Growth in the Americas region was related
to upgrades and purchases by top tier banks and 7-Eleven's purchase of our
advanced function ATMs. Growth experienced in the Asia/Pacific region was
primarily driven by strong markets in China and India as an increasing number of
financial institutions in these countries are installing ATMs for the first
time. The operating income decline in 2002 versus the prior year was mainly due
to lower product revenue and competitive pressure in Europe.

In 2001, revenues increased 3% compared to 2000. This increase was due largely
to the growth in the Asia/Pacific region, particularly in the emerging markets
of India and China, and growth in Europe as banks and financial institutions
prepared for the January 1, 2002 conversion to the Euro currency. The operating
income increase in 2001 versus 2000 was due primarily to higher volume and lower
expenses.

We will leverage our worldwide sales, service and manufacturing presence while
we continue to focus on expense management in our Financial Self Service segment
in 2003. We will also drive expansion in our business in the Asia/Pacific region
as we increase production at our Beijing and India manufacturing facilities. We
expect flat revenue in 2003 as continued softness in the European market is
expected to offset growth in other regions.

Retail Store Automation provides retail-oriented technologies such as POS
terminals, bar-code scanners and software as well as innovative self-checkout
systems and electronic shelf labels to retailers. Our retail solutions are
industry-tested and have proven their business value in the most extreme of
retail environments including high-volume food stores, general merchandisers and
fast-food restaurants. Combining our retail industry expertise, software and
hardware technologies, and implementation and consulting services, our Retail
Store Automation solutions are designed to improve selling productivity and
checkout processes, and increase customer satisfaction for our retail customers.

The following table presents Retail Store Automation revenue and total operating
(loss) income for the years ended December 31:

2002 2001 2000
- -----------------------------------------------------------------------
In millions

Retail Store Automation revenue $714 $834 $894
Retail Store Automation operating (loss) income $(57) $ 10 $ 4
- -----------------------------------------------------------------------

Retail Store Automation revenue decreased 14% in 2002 compared to 2001. The
revenue decline was primarily the result of decreased revenues in the Americas
and Japan regions as retailers continue to delay capital spending. The operating
income decline in 2002 was predominately the result of lower revenue,
competitive pressures and transition costs relating to our supply chain.

In 2001, revenue decreased 7% compared to 2000 due largely to post Y2K and the
continued constrained capital spending of retailers. The improvement in
operating income in 2001 was primarily the result of lower cost and expense.

We expect to see revenue growth in 2003 driven by 2002 order activity which is
likely to be partially offset by continued weakness in the retail marketplace.
We should also begin to harvest our research and development investments as our
product mix shifts to newer products and the industry prepares for a
long-overdue upgrade cycle. Streamlining and lowering the cost in our supply
chain, as well as ongoing expense management, will better position Retail Store
Automation to improve profitability in 2003.

Systemedia provides business consumables and products including paper rolls for
ATMs and POS workstations inkjet and laser printer supplies, thermal transfer
ribbons, labels, ink ribbons, laser documents, business forms and retail office
products. Systemedia products are designed to reduce paper-related failures in
our ATMs and POS terminals and enable businesses to improve transaction accuracy
while reducing overall costs.

The following table presents Systemedia revenue and total operating income for
the years ended December 31:

2002 2001 2000
- ---------------------------------------------------
In millions

Systemedia revenue $518 $503 $502
Systemedia operating income $ 6 $ 1 $ 8
- ---------------------------------------------------

Systemedia revenues increased 3% in 2002 compared to 2001. In 2002, revenue
increased in all regions except the Asia/Pacific region. Operating income
improved in 2002 versus the prior year predominately due to cost reductions in
manufacturing and supply-line management.

10



In 2001, revenue remained relatively flat compared to 2000. The growth
experienced in the Americas region was offset by declines in Japan and the EMEA
and Asia/Pacific regions. Operating income declined in 2001 primarily due to
continued competitive pricing pressures impacting gross margin, offset partially
by lower operating expenses.

We expect revenue for Systemedia to be flat in 2003 compared to 2002. Growth
driven by sales of retail office products and increasing the capture rate of our
ATM and POS customers is expected to be offset by declines in sales of
traditional paper products.

Payment and Imaging provides end-to-end solutions for both traditional
paper-based and image-based item processing. Our imaging solutions utilize
advanced image recognition and workflow technologies to automate item
processing, helping financial industry businesses increase efficiency and reduce
operating costs. Consisting of hardware, software, and consulting and support
services, our comprehensive Payment and Imaging solutions enable check and
item-based transactions to be digitally captured, processed and retained within
a flexible, scalable environment.

The following table presents Payment and Imaging revenue and total operating
income for the years ended December 31:

2002 2001 2000
- ------------------------------------------------------------
In millions

Payment and Imaging revenue $152 $186 $185
Payment and Imaging operating income $ 19 $ 17 $ 18
- ------------------------------------------------------------

Payment and Imaging revenue declined 18% in 2002 compared to 2001. This decline
was largely attributed to the sale of our item-processing outsourcing business
that contributed $30 million of revenue in 2001 (see Note 4 of Notes to
Consolidated Financial Statements). Operating income increased in 2002 compared
to 2001 primarily related to lower operating expenses.

In 2001, revenue remained relatively flat compared to 2000. Operating income
slightly declined during 2001 compared to 2000 due to product margin erosion.

We expect 2003 revenue to be consistent with the revenue generated in 2002.
Payment and Imaging is shifting its focus from traditional item-processing to
imaging solutions as check volume and traditional item-processing decline and
financial institutions move to digital images to process, and potentially clear,
checks electronically.

Customer Services are an essential component of our complete solution offerings.
NCR's Customer Services division is a global leader in IT services delivery. In
addition to providing maintenance and support for our base of NCR solution
customers, our Customer Services segment provides services from consulting to
site design, to staging and implementation and maintenance for third parties, to
complete systems management.

As a result of supporting our solutions around the world, Customer Services has
established an unmatched service delivery capability, and has leveraged this
global presence and experience to develop and deliver a comprehensive portfolio
of IT infrastructure services to businesses in other industries. These high
availability services focus on the vital systems, networks, software and
security that comprise the IT infrastructure of today's businesses, and include
operations management, consulting, deployment and maintenance. Customer Services
provides these services directly to global businesses as well as through
partnerships with leading technology, network and systems suppliers including
Cisco Systems, Dell Computer Corporation, Sun Microsystems and others.

The following table presents Customer Services revenue and total operating
income for the years ended December 31:

2002 2001 2000
- ----------------------------------------------------------------
In millions

Customer Services revenue $1,791 $1,968 $1,945
Customer Services operating income $ 37 $ 170 $ 215
- ----------------------------------------------------------------

Customer Services revenue declined 9% in 2002 compared to 2001. This decline was
largely due to lower maintenance revenue relating to exited businesses, lower
professional services and installation-related services due to lower overall
company revenues and softness in the third-party contracts market. Our exited
businesses relate to bank branch automation, home banking, account processing
and low-end server businesses we exited in the 1990s. Customer Services
maintenance revenue related to exited businesses declined more than $100 million
in 2002. The operating income decline in 2002 was primarily due to lower
maintenance revenue from our exited businesses and margin erosion.

11



In 2001, revenue slightly increased versus 2000 largely due to higher customer
services maintenance revenue for our Financial Self Service solution. The
operating income decline in 2001 compared to 2000 was principally related to
margin erosion from pricing pressures and the impact of exited businesses.

Customer Services revenue is expected to be down in 2003 as the continued
decline in maintenance revenues related to exited businesses will offset the
expected growth in maintenance revenues for Financial Self Service and Retail
Store Automation. The declining revenue from our exited businesses will continue
through 2004. Additionally, Customer Services will continue to focus on
increasing its managed services business in 2003.

Restructuring and re-engineering

In the third quarter of 2002, we announced re-engineering plans to drive
operational efficiency throughout our company. We targeted process improvements
to drive simplification, standardization, globalization and consistency across
the organization. Key business processes and supporting functions are being
evaluated to improve efficiency and effectiveness of operations. To support our
growth initiatives, we will focus on our sales process and sales management.
Initiatives in this area include capitalizing on our value propositions,
improving sales training, territory management and sales metrics and simplifying
the sales process. To reduce our cost of delivering products and services, we
will focus on improvements to our supply chain that will yield lower inventory
levels as well as reductions in inventory handling, freight and warehousing
costs. In addition, we will reduce product costs through design and procurement
initiatives. In services, we will focus on completion of a global model for
service delivery. To reduce our expense structure, we are standardizing our
global IT applications, continuing to reduce our real estate costs and
implementing new global processes within the finance and administration areas to
streamline these processes to begin to reach benchmark standards.

During the fourth quarter of 2002, in connection with these efforts, management
approved a real-estate consolidation and restructuring plan designed to
accelerate our re-engineering and consolidation strategies. Since 1997, we have
reduced the number of facilities utilized by NCR and have reduced the total
space used by more than four million square feet. We will continue to reduce
excess square footage through better utilization of current space, increasing
the use of virtual offices and the sale of underutilized facilities.

As part of our re-engineering, real estate consolidation and restructuring
plans, during the fourth quarter of 2002, we incurred a real estate
consolidation and restructuring charge of $25 million, of which $8 million was
for restructuring charges related to contractual lease termination costs, $9
million related to asset impairment charges and $8 million for lease buy-outs
and other real estate consolidation costs.

Gross margin

Gross margin as a percentage of revenue decreased 1.9 percentage points to 28.4%
in 2002 from 30.3% in 2001. Product gross margin declined 1.4 percentage points
to 34.7% and services gross margin decreased 2.5 percentage points to 21.7%. In
2002, product gross margin included $4 million of asset impairment charges and
services gross margin included $8 million for real estate restructuring charges.
Product gross margin, including the asset impairment charge, declined primarily
due to rate declines relating to competitive pressure in Retail Store Automation
and Financial Self Service combined with lower volume in Retail Store
Automation, partially offset by improved margin performance in Data Warehousing.
The decline in services gross margin was largely due to the lower revenue from
exited businesses, margin erosion relating to competitive pricing pressure and
the impact of the restructuring charge.

The 2001 gross margin decreased 1.0 percentage point compared to 2000. Product
gross margin declined 1.0 percentage point to 36.1% and services gross margin
decreased 0.6 percentage points to 24.2%. In 2001, product gross margin included
$1 million of acquisition-related integration charges and services gross margin
included $5 million of acquisition-related integration charges. Product gross
margin declined largely due to lower hardware margins for Data Warehousing and
Retail Store Automation. The decline in service gross margin was primarily due
to exited businesses and the underutilization of our customer services
infrastructure resulting from the slower economy and its effect on the retail
and telecommunication industries. In 2000, gross margin as a percentage of
revenue was 31.3% and included $37 million of restructuring charges and $1
million of acquisition-related integration charges.

Operating expenses

Selling, general and administrative (SG&A) expenses decreased $149 million, or
11%, in 2002 compared to 2001. Excluding the impact of prior year goodwill
amortization of $67 million, SG&A expenses decreased $82 million, or 7%, of
which $39 million of this decline related to the prior year CCC charge. In 2002,
SG&A expenses included $9 million of real estate consolidation and asset
impairment charges. The decrease in 2002 was primarily due to continued
infrastructure cost improvements and the curtailment of discretionary spending.
This strategy will continue in 2003 as we target process improvements to drive
simplification, standardization and globalization and consistency across the
organization. SG&A expenses decreased $14 million, or 1%, in 2001 compared to
2000. In 2001, SG&A expenses included a $39 million provision for uncollectible
loans and receivables related to CCC and $3 million of acquisition-related
integration charges. The decrease in 2001 SG&A expenses was

12



mainly due to infrastructure improvements and curtailment of discretionary
spending. As a percentage of revenue, SG&A expenses were 20.9%, 22.2% and 22.3%,
in 2002, 2001 and 2000, respectively.

Research and development (R&D) expenses decreased $61 million, or 21%, in 2002
compared to the prior year. The decline in 2002 is a result of utilizing more
industry-standard components and the benefit from consolidating our R&D
facilities. R&D expenses decreased $40 million, or 12%, in 2001 compared to
2000. The decline in 2001 related to the rationalization of our spending and the
elimination of duplicative R&D expenses associated with our customer
relationship management software, as we completed the integration of Ceres
Integrated Solutions, LLC, which we acquired in 2000. In 2000, R&D expenses
included $25 million of in-process R&D charges relating to acquisitions. As a
percentage of revenue, R&D expenses were 4.2%, 5.0% and 5.6% in 2002, 2001 and
2000, respectively.

Cost of revenue and total expenses for the years ended December 31, were
impacted by certain employee benefit plans as shown below:

2002 2001 2000
- ------------------------------------------------
In millions

Pension (income) Expense $(74) $(124) $(124)
Postemployment Expense 75 37 21
Postretirement Expense 16 13 13
- ------------------------------------------------
Net Expense (income) $ 17 $ (74) $ (90)
- ------------------------------------------------

During the 12 months ended December 31, 2002, we realized a $74 million benefit
from pension income versus a $124 million benefit in 2001. The decline was due
primarily to the impact of the investment performance of our pension fund
portfolio in the difficult market environments during 2000 and 2001.
Predominately due to the poor performance of the equity markets over the past
few years and changes to actuarial assumptions, we expect pension expense of
approximately $95 million in 2003.

Postemployment expense (severance, disability and medical) increased to $75
million for the 12 months ended December 31, 2002, versus $37 million in 2001.
This increase in expense was primarily attributable to a $33 million increase
resulting from a change in the assumed demographic mix of our involuntary
employee turnover. The change was made based on actual recent experience
factors. Expense increased by $16 million for the 12 months ended December 31,
2001 versus the comparable period in 2000. This increase was primarily
attributable to a one-time reduction in our long-term disability medical
liability of $12 million in 2000 due to assumption changes relating to long-term
disability recovery rates and mortality rates for people on long-term
disability. We expect our postemployment expense to be approximately $84 million
in 2003.

Postretirement plan expense (medical and life insurance) for the 12 months ended
December 31, 2002 was $16 million, which increased over the prior year,
primarily due to completing the amortization of the benefits of our 1998 plan
design changes during the year.

Income before income tax

Operating income was $189 million in 2002, versus operating income of $186
million and $205 million in 2001 and 2000, respectively. In 2002, operating
income included $5 million of asset-impairment charges and $16 million of real
estate consolidation and restructuring charges. Excluding the impact of
prior-year goodwill amortization of $67 million, operating income decreased $64
million. This decline is primarily due to lower revenue from exited businesses,
margin erosion from competitive pressure and lower product revenue and the
impact of pension and postemployment changes. In 2001, operating income included
a $39 million provision for uncollectible loans and receivables related to CCC,
$9 million of acquisition-related integration charges and $67 million of
goodwill amortization. The decline in operating income in 2001 reflected a lower
mix of higher-margin product revenues versus services revenue and lower customer
services margins, partially offset by a reduction in operating expenses. In
2000, operating income included $38 million of restructuring and related
charges, $25 million of in-process R&D charges relating to an acquisition and $2
million of acquisition-related integration charges.

Interest expense was $19 million in 2002, $18 million in 2001 and $13 million in
2000. Other expense, net, was $39 million in 2002, and consisted primarily of a
$14 million investment basis write-down of marketable securities in Japan for
losses that were considered to be other than temporary, a $9 million charge
relating to an indemnification claim made by Lucent Technologies, Inc. (see Note
11 of Notes to Consolidated Financial Statements), $8 million of real estate
consolidation impairment charges and $6 million of costs relating to the
disposition of a small non-strategic business. Other expense, net, was $44
million in 2001, and consisted predominately of a $40 million charge related to
the Fox River environmental matter (see Note 11 of Notes to Consolidated
Financial Statements), $7 million of goodwill amortization expense and $16
million of investment basis write-downs for losses that were considered to be
other than temporary. These expenses were partially offset by $10 million of
interest income and $20 million of other income representing both a gain from
the sale of our account and item-processing outsourcing businesses and a gain
related to the demutualization of one of our health insurance providers. Other
income, net, was $83 million

13



in 2000, which consisted primarily of $48 million in gains from facility sales
and $31 million of interest income, partially offset by $6 million in goodwill
amortization expense.

Income tax

Income tax expense was $3 million in 2002 compared to income tax benefit of $97
million in 2001 and income tax expense of $97 million in 2000. The income tax
expense in 2002 was reduced by a $15 million benefit relating to the resolution
of outstanding issues on refund claims from the U.S. and French governments. The
income tax benefit in 2001 included a $138 million benefit resulting from the
favorable settlement of audit issues in our 1993 and 1994 tax years related to a
number of international dividend transactions. These issues had been the subject
of dispute between the Internal Revenue Service (IRS) and NCR, therefore, a
reserve for these items had been established in prior periods. Upon favorable
settlement of the dispute during 2001, the reserve was released.

Our effective tax rate was approximately 14% for 2002 excluding the tax impacts
relating to the adoption of Statement of Financial Accounting Standard No. 142
(SFAS 142), "Goodwill and Other Intangible Assets," and the benefit from the
resolution of outstanding issues on refund claims. Each year our effective tax
rate includes a certain amount of benefit related to the use of foreign tax
credits. For 2002, the amount of such benefit as compared to the amount of
income before tax was larger than previous years. Our effective tax rate was
approximately 33% for 2001 excluding the impact of the provision for
uncollectible loans and receivables related to CCC, acquisition-related
integration costs, a charge related to the Fox River environmental matter, the
cumulative effect of adopting Statement of Financial Accounting Standards No.
133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities,"
and the benefit from the favorable resolution of international income tax issues
described above. Our effective tax rate was approximately 33% for 2000,
excluding restructuring and other related charges, acquisition-related
integration and in-process R&D charges. We anticipate our tax rate will be
approximately 28% in 2003.

Cumulative effect of accounting change

The cumulative effect of accounting change in 2002 was a non-cash, net-of-tax
goodwill impairment charge of $348 million which relates to the adoption of SFAS
142. The cumulative effect of accounting change in 2001 of $4 million relates to
the adoption of SFAS 133.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Our cash, cash equivalents and short-term investments totaled $526 million at
December 31, 2002 compared to $336 million and $357 million at December 31, 2001
and 2000, respectively.

We generated cash flow from operations of $247 million, $146 million and $171
million in 2002, 2001 and 2000, respectively. The cash generated from operations
in 2002 was driven by operating profitability and was partially offset by
negative net working capital and disbursements for employee severance and
pension. Net working capital was impacted by a $90 million increase in
receivables largely relating to the discontinuation of receivables factoring in
2002. The cash generated in 2001 was driven by operating profitability and
improved asset management, specifically accounts receivable, partially offset by
disbursements for employee severance and pension. Receivable balances decreased
$212 million in 2001 compared to an $80 million increase in 2000. The decrease
in receivables in 2001 versus 2000 was primarily attributable to lower
fourth-quarter revenues, incremental factoring of receivables of approximately
$18 million and a continued focus on collections. The cash generated from
operations in 2000 was driven primarily by operating results, partially offset
by disbursements for employee severance and pension.

Net cash flows used in investing activities was $220 million, $233 million and
$367 million in 2002, 2001 and 2000, respectively. The net use of cash in
investing activities in 2002, 2001 and 2000 primarily represented net capital
expenditures for property, plant and equipment, reworkable service parts and
additions to capitalized software. Capital expenditures were $259 million, $325
million and $391 million for the years ended 2002, 2001 and 2000, respectively.
Proceeds from sales of property, plant and equipment are primarily driven by our
continued focus to reduce our excess real estate. We have progressively reduced
our capital spending due to the challenging economic climate and we will
continue to manage our capital expenditures below our depreciation and
amortization expense. In 2000, we reduced our net short-term investment position
by $182 million to fund acquisition activities.

Net cash provided by financing activities was $151 million and $87 million in
2002 and 2001, respectively, compared to a $7 million use in 2000. The net cash
provided in 2002 was primarily driven by the net proceeds received from our
private issuance of long-term debt, offset in part by the repurchase of Company
common stock and repayment of short-term debt. The proceeds from the issuance of
the June 2002 long-term debt were $296 million after discount and expenses.
Proceeds from short-term borrowings were $101 million, $213 million and $10
million for 2002, 2001 and 2000, respectively. During 2002, $234 million of cash
was utilized to repay short-term borrowings, compared to repayments of $171
million and $21 million for 2001 and 2000, respectively. We used $66 million,
$60 million and $110 million in 2002, 2001 and 2000, respectively, for the
purchase of Company common stock pursuant to the systematic stock repurchase
program. We expect this program to continue in 2003.

14



Other financing activities primarily relate to share activity under our stock
option and employee stock purchase plans. Proceeds from our employee stock plans
were $51 million, $101 million and $122 million for 2002, 2001 and 2000,
respectively.

In 2002, global capital market developments resulted in negative returns on
NCR's pension funds and a decline in the discount rate used to estimate the
pension liability. As a result, the accumulated benefit obligation exceeded the
fair value of plan assets and NCR was required to adjust the minimum pension
liability recorded in the consolidated balance sheet. This $841 million charge
decreased prepaid pension costs by $523 million, increased pension liabilities
by $325 million, increased intangible assets by $7 million, increased deferred
taxes by $290 million and increased other comprehensive loss by $551 million.
This non-cash charge did not affect our 2002 earnings, cash flow or debt
covenants, nor did it otherwise impact our business operations.

Contractual and Commercial Commitments In the normal course of business, we
enter into various contractual and other commercial commitments that impact, or
could impact, the liquidity of our operations. The following table outlines our
commitments at December 31, 2002:



Total Less than 1-3 4-5 Over 5
Amounts 1 Year Years Years Years
- -----------------------------------------------------------------------------------------

In millions
Long-term debt $ 306 $ -- $ 1 $ -- $305
Operating leases (non-cancelable) 342 64 85 56 137
Short-term borrowings 5 5 -- -- --
- -----------------------------------------------------------------------------------------
Total Contractual $ 653 $ 69 $86 $ 56 $442
=========================================================================================

Unused lines of credit/1/ $ 762 $362 $-- $400 $ --
Standby letters of credit and surety bonds 226 54 77 -- 95
Other corporate guarantees 19 2 4 -- 13
Other commitments 14 -- 10 -- 4
- -----------------------------------------------------------------------------------------
Total Commerical $1,021 $418 $91 $400 $112
=========================================================================================


/1/ Includes unused bank overdraft facilities and other uncommitted funds of
$162 million.

We had debt with scheduled maturities of less than one year of $5 million and
$138 million at December 31, 2002 and 2001, respectively. We used a portion of
the proceeds from the $300 million senior unsecured notes (as described below),
issued in June 2002, to repay short-term debt. The weighted average interest
rate for such debt was 5.5% at December 31, 2002 and 3.5% at December 31, 2001.
The increase in the weighted average interest rate reflects a reduced borrowing
in Japan (which has lower rates) in 2002 versus the prior year. We had long-term
debt and notes totaling $306 million and $10 million at December 31, 2002 and
2001, respectively. Material obligations had U.S. dollar-equivalent interest
rates ranging from 7.1% to 9.5% with scheduled maturity dates from 2009 to 2020.
The scheduled maturities of the outstanding long-term debt and notes during the
next five years are $1 million in 2004, with the remainder after 2008.

In October 2002, we renewed a $200 million 364-day unsecured credit facility
with a one-year term-out option with a syndicate of financial institutions. The
364-day facility coincides with a $400 million, five-year unsecured revolving
credit facility which we entered into in October 2001. The credit facilities
contain certain representations and warranties; conditions; affirmative,
negative and financial covenants; and events of default customary for such
facilities. Interest rates charged on borrowings outstanding under the credit
facilities are based on prevailing market rates. No amounts were outstanding
under the facilities at December 31, 2002 and 2001.

In June 2002, we issued $300 million of senior unsecured notes due in 2009. The
notes were sold privately pursuant to Rule 144A and Regulation S of the
Securities Act. The net proceeds from the notes were used to repay a portion of
our short-term debt with the remainder available for general corporate purposes.
The notes bear interest at an annual rate of 7.125%, which increased 0.25% as of
November 4, 2002, and will continue to accrue interest until certain
registration requirements are met. This interest is payable semi-annually in
arrears on each June 15 and December 15, beginning December 15, 2002, and
contain certain covenants typical of this type of debt instrument.

Our cash flows from operations, the credit facilities (existing or future
arrangements), the 7.125% senior notes, and other short- and long-term debt
financing, will be sufficient to satisfy our future working capital, R&D,
capital expenditures and other financing requirements for the foreseeable
future. Our ability to generate positive cash flows from operations is dependent
on general economic conditions, competitive pressures, and other business and
risk factors described below in "Factors That May Affect Future Results." If we
are unable to generate sufficient cash flows from operations, or otherwise
comply with the terms of our credit facilities and the 7.125% senior notes, we
may be required to refinance all or a portion of our existing debt or seek
additional financing alternatives.

15



Our current focus on improving free cash flow, which we define as cash flow from
operating activities less capital expenditures for property, plant and
equipment, reworkable service parts, and additions to capitalized software, and
a continued focus on balance sheet management has increased our ability to
generate cash. During 2002, we generated a $167 million free cash flow
improvement over 2001, which was primarily driven by improvement in operating
activities and a reduction in capital expenditures.

2002 2001 2000
- --------------------------------------------------------------------------
In millions
Net cash provided by operating activities $ 247 $ 146 $ 171

Less:
Net expenditures and proceeds for service parts (113) (117) (108)
Expenditures for property, plant and equipment (81) (141) (216)
Additions to capitalized software (65) (67) (67)
- --------------------------------------------------------------------------
Free cash flow $(12) $(179) $(220)
==========================================================================

FACTORS THAT AFFECT FUTURE RESULTS

This annual report, including the Shareholder's Letter, and other documents that
we file with the Securities and Exchange Commission (SEC), as well as other oral
or written statements we may make from time to time, contain information based
on management's beliefs and include forward-looking statements (within the
meaning of the Private Securities Litigation Reform Act of 1995) that involve a
number of known and unknown risks, uncertainties and assumptions. These
forward-looking statements are not guarantees of future performance, and there
are a number of factors including, but not limited to, those listed below, which
could cause actual outcomes and results to differ materially from the results
contemplated by such forward-looking statements. We do not undertake any
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.

Economic Pressures Our business is affected by the global economies in which we
operate. The recent economic downturn and the subsequent decline in capital
spending by many industries, particularly retail and telecommunications, could
impact our ability to meet our commitments to customers, the ability of our
suppliers to meet their commitments to us, the timing of purchases by our
current and potential customers, or the ability of our customers to fulfill
their obligations to us on a timely basis. The extent of this impact, if any, is
dependent on a number of factors, including the duration and intensity of the
downturn, its effect on the markets in general and other general economic and
business conditions.

Competition Our ability to compete effectively within the technology industry is
critical to our future success. We operate in the intensely competitive
information technology industry. This industry is characterized by rapidly
changing technology, evolving industry standards, frequent new product
introductions, price and cost reductions, and increasingly greater
commoditization of products, making differentiation difficult. Our competitors
include other large, successful companies in the technology industry such as:
International Business Machines Corporation (IBM), Oracle Corporation, Diebold,
Inc., Dell Computer Corporation, Wincor Nixdorf GmbH & Co., Getronics NV and
Unisys Corporation, some of which have widespread penetration of their platforms
and service offerings. In addition, we compete with companies in specific
markets such as self-check out, electronic shelf labels, entry-level ATMs,
payment and imaging, and business consumables and media products.

We offer a broad suite of consulting and support services across our Data
Warehousing, Financial Self Service, Retail Store Automation and Payment and
Imaging segments. We compete with companies in consulting and support services,
and we partner with companies such as Cisco Systems, Dell Computer Corporation
and Sun Microsystems to deliver IT infrastructure services solutions and also
offer consulting and support services.

Our future competitive performance and market position depend on a number of
factors, including our ability to: react to competitive product and pricing
pressures; penetrate developing and emerging markets such as India and China in
the ATM business; rapidly and continually design, develop and market, or
otherwise maintain and introduce, solutions and related products and services
for our customers that are competitive in the marketplace; react on a timely
basis to shifts in market demands; reduce costs without creating operating
inefficiencies; maintain competitive operating margins; improve product and
service delivery quality; and market and sell all of our diverse solutions
effectively. Our business and operating performance could be impacted by
external competitive pressures, such as increasing price erosion, particularly
in the industries targeted by our more mature solution offerings such as Retail
Store Automation and Financial Self Service Solutions. In addition, our Payment
and Imaging segment is shifting from traditional item processing as check volume
and the traditional item processing markets are declining and financial
institutions are migrating to a digital process with the potential to clear
checks electronically.

16



Our customers finance many of our product sales through third-party financing
companies. In case of customer default, these financing companies may be forced
to resell this equipment at discounted prices impacting our ability to sell
incremental units. The impact of these competitive product and pricing pressures
could include lower customer satisfaction, decreased demand for our solutions,
loss of market share and reduction of operating profits.

Operating Result Fluctuations Future operating results could continue to be
subject to fluctuations based on a variety of factors, including:

Seasonality Our sales are historically seasonal, with revenue higher in the
fourth quarter of each year. During the three quarters ending in March, June and
September, we have historically experienced less favorable results than in the
quarter ending in December. Such seasonality also causes our working capital and
cash flow requirements to vary from quarter to quarter depending on the
variability in the volume, timing and mix of product and services sales. In
addition, revenue in the third month of each quarter is typically higher than in
the first and second months. These factors, among others, make forecasting more
difficult and may adversely affect our ability to predict financial results
accurately.

Cost/Expense Reductions We are actively working to manage our costs and expenses
to continue improving operating profitability without jeopardizing the quality
of our products or the efficiencies of our operations. We are also striving to
become the leading, low-cost provider of certain Financial Self Service and
Retail Store Automation solutions. Our success in achieving targeted cost and
expense reductions depends on a number of factors, including our ability to
achieve infrastructure rationalizations, drive lower component costs, improve
supply chain efficiencies, improve accounts receivable collections, and reduce
inventory overhead, among other things. If we do not successfully complete our
cost reduction initiatives, our results of operations or financial condition
could be adversely affected.

Contractual Obligations of Consulting Services We maintain a professional
services consulting workforce to fulfill contracts that we enter into with our
customers that may extend to multiple periods. Our profitability may be impacted
if we are not able to control costs and maintain utilization rates. Our
profitability is largely a function of performing to customer contractual
arrangements within the estimated costs to perform these obligations. If we
exceed these estimated costs, our profitability under these contracts may be
negatively impacted. In addition, if we are not able to maintain appropriate
utilization rates for our professionals, we may not be able to sustain our
profitability.

Acquisitions and Divestitures As part of our solutions strategy, we intend to
continue to selectively acquire and divest technologies, products and
businesses. As these activities take place and we begin to include, or exclude
as the case may be, the financial results related to these investments could
cause our operating results to fluctuate.

Pension Funds Consistent with local competitive practice and regulations, we
sponsor pension plans in many of the countries where we do business. A number of
these pension plans are supported by pension fund investments which are subject
to financial market risk. The liabilities and assets of these plans are reported
in our financial statements in accordance with Statement of Financial Accounting
Standards SFAS No. 87 (SFAS 87), "Employer's Accounting for Pensions." In
conforming to the requirements of SFAS 87, we are required to make a number of
actuarial assumptions for each plan, including expected long-term return on plan
assets and discount rate. Our future financial results could be materially
impacted by changes in these actuarial assumptions, including those described
below in our "Critical Accounting Policies and Estimates." Consistent with the
requirements of paragraphs 44-45 of SFAS 87, we estimate our discount rate and
long-term expected rate of return on assets assumptions on a country-by-country
basis after consultation with independent actuarial consultants. We examine
interest rate trends within each country, particularly yields on high-quality
long-term corporate bonds, to determine our discount rate assumptions. Our
long-term expected rate of return on asset assumptions are developed by
considering the asset allocation and implementation strategies employed by each
pension fund relative to capital market expectations.

Real Estate Our strategy over the past four years with respect to real estate
has been to reduce our holdings of excess real estate and to improve liquidity.
In line with this strategy, we anticipate the sale of facilities, which may
impact net income. We will intensify our actions to reduce the size of our real
estate portfolio during the upcoming year.

Multinational Operations Generating substantial revenues from our multinational
operations helps to balance our risks and meet our strategic goals. Currently,
approximately 57% of our revenues come from outside the United States. We
believe that our geographic diversity may help to mitigate some risks associated
with geographic concentrations of operations (e.g. adverse changes in foreign
currency exchange rates, deteriorating economic environments or business
disruptions due to economic or political uncertainties, and cultural business
practices that may be different from U.S. business practices). However, our
ability to sell our solutions domestically in the United States and
internationally is subject to the following risks, among others: general
economic and political conditions in each country which could adversely affect
demand for our solutions in these markets; currency exchange rate fluctuations
which could result in lower demand for our products as well as generate currency
translation losses; changes to and compliance with a variety of local laws and
regulations which may increase our cost of doing business in these markets or
otherwise prevent us from effectively competing in these markets; and the impact
of civil unrest relating to war and terrorist activity on the economy or markets
in general, or on our ability, or that of our suppliers, to meet commitments.

17



Introduction of New Solutions The solutions we sell are complex, and we need to
rapidly and successfully develop and introduce new solutions. We operate in a
competitive, rapidly changing environment, and our future business and operating
results depend in part on our ability to develop and introduce new solutions
that our customers choose to buy. This includes our efforts to rapidly develop
and introduce next generation software applications especially for our Data
Warehousing business. The development process for our complex solutions,
including our software application development programs, requires high levels of
innovation from both our developers and our suppliers of the components embedded
in our solutions. In addition, the development process can be lengthy and
costly, and requires us to commit a significant amount of resources to bring our
business solutions to market.

If we are unable to anticipate our customers' needs and technological trends
accurately, or are otherwise unable to complete development efficiently, we
would be unable to introduce new solutions into the market on a timely basis, if
at all, and our business and operating results could be impacted. Likewise, we
sometimes make commitments to customers regarding new technologies, and our
results could be impacted if we are unable to deliver such technologies as
planned. In addition, if we are unable to successfully market and sell both
existing and newly developed solutions, such as our advanced-function ATMs,
self-checkout technologies and electronic shelf labels, and transition our
Payment and Imaging solutions from traditional item processing to imaging, our
business and operating results could be impacted.

Our solutions, which contain both hardware and software products, may contain
known, as well as undetected errors, which may be found after the products'
introduction and shipment. While we attempt to remedy errors that we believe
would be considered critical by our customers prior to shipment, we may not be
able to detect or remedy all such errors, and this could result in lost
revenues, delays in customer acceptance and incremental costs, which would all
impact our business and operating results.

Reliance on Third Parties Third party suppliers provide important elements to
our solutions. We rely on many suppliers for necessary parts and components to
complete our solutions. In most cases, there are a number of vendors producing
the parts and components that we utilize. However, there are some components
that are purchased from single sources due to price, quality, technology or
other reasons. For example, we depend on chips and microprocessors from Intel
Corporation and operating systems from UNIX and Microsoft Windows NT(R). Certain
parts and components used in the manufacture of our ATMs and the delivery of
many of our Retail Store Automation solutions are also supplied by single
sources. If we were unable to purchase the necessary parts and components from a
particular vendor and we had to find an alternative supplier for such parts and
components, our new and existing product shipments and solutions deliveries
could be delayed, impacting our business and operating results.

We have, from time to time, formed alliances with third parties that have
complementary products, software, services and skills. Many different
relationships are formed by these alliances such as outsourcing arrangements to
manufacture hardware and subcontract agreements with third parties to perform
services and provide products and software to our customers in connection with
our solutions. For example, we rely on third parties for cash replenishment
services for our ATM products. These alliances introduce risks that we cannot
control such as non-performance by third parties and difficulties with or delays
in integrating elements provided by third parties into our solutions.

Lack of information technology infrastructure, manual processes and data
integrity issues of smaller suppliers can also create product time delays,
inventory and invoicing problems and staging delays, as well as other operating
issues. The failure of third parties to provide high-quality products or
services that conform to required specifications or contractual arrangements
could impair the delivery of our solutions on a timely basis, create exposure
for non-compliance with our contractual commitments to our customers and impact
our business and operating results.

Intellectual Property As a technology company, our intellectual property
portfolio is key to our future success. Our intellectual property portfolio is a
key component of our ability to remain a leading technology and services
solutions provider. To that end, we aggressively protect and work to enhance our
proprietary rights in our intellectual property through patent, copyright,
trademark and trade secret laws, and if our efforts fail, our business could be
impacted. In addition, many of our offerings rely on technologies developed by
others, and if we are not able to continue to obtain licenses for such
technologies, our business could be impacted. There has been a recent increase
in the issuance of software and business method patents and more companies are
aggressively enforcing their intellectual property rights. This trend could
impact NCR because from time to time we receive notices from third parties
regarding patent and other intellectual property claims such as those made by LG
Electronics (LGE) as described in Note 11 of Notes to Consolidated Financial
Statements. Whether such claims are with or without merit, they may require
significant resources to defend. If an infringement claim is successful, in the
event we are unable to license the infringed technology or to substitute similar
non-infringing technology, our business could be adversely affected.

Work Environment

Restructuring As we discussed above, we are implementing a re-engineering plan
to drive operational efficiency throughout our company. In order to drive cost
and expense out of our businesses, we are rationalizing our infrastructure
through real estate and support cost reductions; simplifying our front- and
back-office processes by, for example, standardizing global IT applications

18



and finance and administration processes; reducing our product costs through
design and procurement initiatives; and working to lower our cost of services
through completion of a global model for such services. In addition to reducing
costs and expenses, our plan includes initiatives to grow revenue such as
improving sales training, addressing sales territory requirements and focusing
on our strong value propositions. If we are not successful in managing the
required changes to implement this plan, in particular those related to changing
our internal processes, our business and operating results could be impacted.

Employees Our employees are vital to our success. Our ability to attract and
retain highly-skilled technical, sales, consulting and other key personnel is
critical, as these key employees are difficult to replace and our current
re-engineering efforts may adversely impact our workforce. If we are not able to
attract or retain highly qualified employees by offering competitive
compensation, secure work environments and leadership opportunities now and in
the future, our business and operating results could be impacted.

Internal Controls / Accounting Policies and Practices Our internal controls,
accounting policies and practices, and internal information systems enable us to
capture and process transactions in a timely and accurate manner in compliance
with GAAP, laws and regulations, taxation requirements and federal securities
laws and regulations. While we believe these controls, policies, practices and
systems are adequate to ensure data integrity, unanticipated and unauthorized
actions of employees (both domestic and international) or temporary lapses in
internal controls due to resource constraints could lead to improprieties that
could impact our financial condition or results of operations.

Information Systems It is periodically necessary to replace, upgrade or modify
our internal information systems. If we are unable to replace, upgrade or modify
such systems in a timely and cost effective manner, especially in light of
strains on our information technology resources, our ability to capture and
process financial transactions and therefore our financial condition or results
of operation may be impacted.

Acquisitions and Alliances Our ability to successfully integrate acquisitions or
effectively manage alliance activities will help drive future growth. As part of
our overall solutions strategy, we intend to continue making investments in
companies, products, services and technologies, either through acquisitions,
joint ventures or strategic alliances. Acquisitions and alliance activities
inherently involve risks. The risks we may encounter include those associated
with assimilating and integrating different business operations and control
procedures, corporate cultures, personnel, infrastructures and technologies or
products acquired or licensed, retaining key employees and the potential for
unknown liabilities within the acquired or combined business. The investment or
alliance may also disrupt our ongoing business, or we may not be able to
successfully incorporate acquired products, services or technologies into our
solutions and maintain quality. Further, we may not achieve the projected
synergies once we have integrated the business into our operations.

It is our policy not to discuss or comment upon negotiations regarding such
business combinations or divestitures unless they are material and a definitive
agreement is signed or circumstances indicate a high degree of probability that
a material transaction will be consummated, unless the law requires otherwise.

Environmental Our historical and ongoing manufacturing activities subject us to
environmental exposures. Our facilities and operations are subject to a wide
range of environmental protection laws, and we have investigatory and remedial
activities underway at a number of facilities that we currently own or operate,
or formerly owned or operated, to comply, or to determine compliance, with such
laws. Given the uncertainties inherent in such activities, there can be no
assurances that the costs required to comply with applicable environmental laws
will not impact future operating results.

We have also been identified as a potentially responsible party in connection
with certain environmental matters, including the Fox River matter, as further
described in "Environmental Matters" under Note 11 of Notes to Consolidated
Financial Statements and in the "Critical Accounting Policies and Estimates"
section of this Management's Discussion and Analysis of Financial Condition and
Results of Operations, and we incorporate such disclosures by reference and make
them a part of this risk factor. As described in more detail in such
disclosures, we maintain an accrual for our potential liability on the Fox River
matter which represents certain critical estimates and judgments made by us
regarding our potential liability; however, both the ultimate costs associated
with the Fox River site and our share of those costs are subject to a wide range
of potential outcomes.

Contingencies Like other technology companies, we face uncertainties with regard
to regulations, lawsuits and other related matters. In the normal course of
business, we are subject to proceedings, lawsuits, claims and other matters,
including those that relate to the environment, health and safety, employee
benefits, export compliance, intellectual property and other regulatory
compliance and general matters. Because such matters are subject to many
uncertainties, their outcomes are not predictable. While we believe that amounts
provided in our consolidated financial statements are currently adequate in
light of the probable and estimable liabilities, there can be no assurances that
the amounts required to satisfy alleged liabilities from such matters will not
impact future operating results. Additionally, we are subject to diverse and
complex laws and regulations, including those relating to corporate governance,
public disclosure and reporting, which are rapidly changing and subject to many
possible changes in the future. Although we do not believe that recent
regulatory and legal initiatives will result in significant changes to our
internal practices or our operations, rapid changes in accounting standards,
taxation requirements (including tax rate changes,

19



new tax laws and revised tax interpretations), and federal securities laws and
regulations, among others, may substantially increase costs to our organization
and could impact our future operating results.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements are prepared in accordance with GAAP. In
connection with the preparation of these financial statements, we are required
to make assumptions, estimates and judgments that affect the reported amounts of
assets, liabilities, revenues, expenses and the related disclosure of contingent
liabilities. These assumptions, estimates and judgments are based on historical
experience and assumptions that are believed to be reasonable at the time.
However, because future events and their effects cannot be determined with
certainty, the determination of estimates requires the exercise of judgment. Our
critical accounting policies are those which require assumptions to be made
about matters that are highly uncertain. Different estimates could have a
material impact on our financial results. Judgments and uncertainties affecting
the application of these policies and estimates may result in materially
different amounts being reported under different conditions or circumstances.
Our management continually reviews these estimates and assumptions to ensure
that our financial statements are presented fairly and are materially correct.

In many cases, the accounting treatment of a particular transaction is
specifically dictated by GAAP and does not require significant management
judgment in its application. There are also areas in which management's judgment
in selecting among available alternatives would not produce a materially
different result. The significant accounting policies and estimates that we
believe are the most critical to aid in fully understanding and evaluating our
reported financial results are discussed in the paragraphs below. Our senior
management has reviewed these critical accounting policies and related
disclosures with our independent auditors and the Audit Committee of our Board
of Directors (see Note 1 of Notes to Consolidated Financial Statements, which
contains additional information regarding our accounting policies and other
disclosures required by GAAP).

Revenue Recognition We are a solutions company which provides our customers with
computer hardware, software, professional consulting services and customer
support services. Consistent with other companies that provide similar solution
offerings, revenue recognition is often complex and subject to multiple
accounting pronouncements including Staff Accounting Bulletin No. 101 (SAB 101),
"Revenue Recognition in Financial Statements," Statement of Position No. 97-2
(SOP 97-2), "Software Revenue Recognition," and related interpretations.

In general, we consider revenue realized, or realizable, and earned when
persuasive evidence of an arrangement exists, the products or services have been
provided to the customer, the sales price is fixed or determinable and
collectibility is reasonably assured. This policy is consistently applied to all
of our operating segments.

Hardware and software revenue is recognized upon shipment, delivery,
installation or customer acceptance of the product, as defined in the customer
contract. Generally, we do not sell our software products without the related
hardware as our software products are embedded in the hardware we sell. Our
typical solution requires no significant production, modification or
customization of the software or hardware that is essential to the functionality
of the products other than installation for our more complex solutions. For
these complex solutions, revenue is deferred until all customer contractual
obligations have been met.

Our sales arrangements often include support services in addition to hardware
and software. These services could include hardware and software maintenance,
upgrade rights, customer support and professional consulting services. For sales
arrangements that include bundled hardware, software and services, we account
for any undelivered service offering as a separate element of a multiple-element
arrangement. These services are typically not required to operate the hardware
and software. Revenue deferred for services is determined based upon
vendor-specific objective evidence of the fair value of the elements as
prescribed in SOP 97-2. For these services, revenue is typically recognized
ratably over the period benefited or when the services are complete. If the
services are essential to the functionality of the hardware and software,
revenue from the hardware and software components is deferred until the
essential services are complete.

Revenue recognition for complex contractual arrangements require a greater
degree of judgment, including a review of specific contracts, past experience,
credit-worthiness of customers, international laws and other factors. Changes in
judgments about these factors could impact the timing and amount of revenue
recognized between periods.

Allowance for Doubtful Accounts We evaluate the collectibility of our accounts
receivable based on a number of factors. We establish provisions for doubtful
accounts using percentages of our accounts receivable balances as an overall
proxy to reflect historical average credit losses and provision for known
issues. These percentages are applied to aged accounts receivable balances. Aged
accounts are determined based on the number of days the receivable is
outstanding, measured from the date of the invoice, or from the date on which
payment is due. As the age of the receivable increases, the provision percentage
also increases. This policy is applied to all of our operating segments.

20



Based on the factors below, we periodically review customer account activity in
order to assess the adequacy of the allowances provided for potential losses.
Factors considered include economic conditions and each customer's payment
history and credit worthiness. Judgment is used to assess the collectibility of
account balances, and the credit worthiness of a customer.

The Allowance for Doubtful Accounts for the periods ended December 31 was $25
million in 2002, $54 million in 2001 and $24 million in 2000. These allowances
represent 2.0%, 4.6% and 1.8% of gross receivables for 2002, 2001 and 2000,
respectively. The increase in the allowance for doubtful accounts between 2001
and 2000 represents a $39 million provision for uncollectible loans and
receivables related to CCC. Although no near-term changes are expected,
unforeseen changes to future allowance percentages could materially impact
overall financial results.

Given our experience, we believe that the reserves for potential losses are
adequate, but if one or more of our larger customers were to default on its
obligations, we could be exposed to potentially significant losses in excess of
the provisions established. If economic conditions worsen, impacting our
customers' ability to pay, we may increase our reserves for doubtful accounts.

Inventory Valuation Inventories are stated at lower of cost or market. Each
quarter, our business segments reassess raw materials, work-in-process, parts
and finished equipment inventory average costs for purchase or usage variances
from standards and valuation adjustments are made. Additionally, to properly
provide for potential exposure due to slow moving, excess, obsolete or unusable
inventory, a reserve against inventory is established. This reserve is
established based on forecasted usage, orders, technological obsolescence and
inventory aging. These factors are impacted by market conditions, technology
changes, and changes in strategic direction, and require estimates and
management judgment that may include elements that are uncertain. On a quarterly
basis, we review the current market value of inventory and require each business
segment to ensure that inventory balances are adjusted for any inventory
exposure due to age or excess of cost over market value.

We have inventory in more than 40 countries around the world. We transfer
inventory from our plants to our distribution and sales organizations. This
inventory is transferred at cost plus mark-up. This mark-up is referred to as
inter-company profit. Each quarter we review our inventory levels and analyze
our inter-company profit for each of our segments to determine the amount of
inter-company profit to eliminate. Key assumptions are made to estimate product
gross margins, the product mix of existing inventory balances and current period
shipments. Over time, we refine these estimates as facts and circumstances
allow. If our estimates require refinement our results could be impacted.

Our inventory reserve balances of $66 million, $54 million and $54 million as of
December 31, 2002, 2001 and 2000 represent 20.2%, 16.2% and 15.8% of our gross
inventory balances for each period. Although we strive to achieve a balance
between market demands and risk of inventory excess or obsolescence caused by
these factors, it is possible that, should conditions change, additional
reserves may be needed. Any changes in reserves will impact operating income
during a given period. This policy is consistently applied to all of our
operating segments and we do not anticipate any changes to our policy in the
near term.

Warranty Reserves One of our key strategies is to provide superior quality
products and services. To that end, we provide a standard manufacturer's
warranty extending up to 12 months such that, should products under warranty
require repair, no additional cost of that repair will be charged to our
customers. A corresponding estimated liability for potential warranty costs is
also recorded at the time of the sale. We sometimes offer extended warranties to
our customers for purchase. We defer the fair value of these revenues and
recognize revenue over the life of the warranty. This impacts all segments of
our business except for the "Other" segment where minimal warranty, if any, is
offered.

Future warranty obligation costs are based upon historic factors such as labor
rates, average repair time, travel time, number of service calls per machine and
cost of replacement parts. Each segment consummating a sale recognizes the total
customer revenue and records the associated warranty liability based upon the
pre-established warranty percentages for that product class.

Total warranty costs for the period ended December 31, 2002 were $16 million,
$18 million in 2001 and $24 million in 2000, representing 0.6%, 0.6% and 0.8% of
total product revenues in the respective periods. Historically the principal
factor used to estimate our warranty costs has been service calls per machine.
Significant changes in this factor could result in actual warranty costs
differing from accrued estimates. Although no near-term changes in our estimated
warranty reserves are currently anticipated, in the unlikely event of a
significant increase in warranty claims by one or more of our larger customers,
costs to fulfill warranty obligations would be higher than provisioned, thereby
impacting results.

Pension, Postretirement and Postemployment Benefits We account for defined
benefit pension plans in accordance with SFAS 87 which requires that amounts
recognized in financial statements be determined on an actuarial basis. Our
postretirement plans are accounted for in accordance with Statement of Financial
Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and our postemployment plans are
accounted for in accordance with Statement of Financial Accounting Standards No.
112 (SFAS 112), "Employers' Accounting for Postemployment Benefits." We have
significant pension, postretirement and postemployment benefit costs and
credits, which are developed from actuarial valuations. Actuarial assumptions
attempt to anticipate future events and are used in calculating the expense and
liability relating

21



to these plans. These factors include assumptions we make about interest rates,
expected investment return on plan assets, rate of increase in health care
costs, total and involuntary turnover rates, and rates of future compensation
increases. In addition, our actuarial consultants also use subjective factors
such as withdrawal rates and mortality rates to develop our valuations. We
generally review and update these assumptions on an annual basis at the
beginning of each fiscal year. We are required to consider current market
conditions, including changes in interest rates, in making these assumptions.
The actuarial assumptions that we use may differ materially from actual results
due to changing market and economic conditions, higher or lower withdrawal rates
or longer or shorter life spans of participants. These differences may result in
a significant impact to the amount of pension, postretirement or postemployment
benefits expense we have recorded or may record. Postretirement and
postemployment expenses impact all of our segments, while pension income is
reported at the corporate level.

The key assumptions used in developing our 2002 pension and postretirement plan
expense were the discount rate of 7.25% and expected return on assets assumption
of 10% for our U.S. plans which represents 69% and 100% of pension and
postretirement plan obligations, respectively. Holding all other assumptions
constant, a 0.25% change in the discount rate used for the U.S. plan would have
increased or decreased pre-tax 2002 income by approximately $2 million.
Likewise, a 0.25% change in the expected rate of return on plan assets
assumption would have increased or decreased pre-tax 2002 income by
approximately $7 million. Our expected return on plan assets has historically
been and will likely continue to be material to operating and net income. While
it is required that we review our actuarial assumptions each year at the
measurement date, we generally do not change them between measurement dates. We
use a measurement date of December 31, for all of our plans. In determining 2003
pension and postretirement expense for the U.S. plans, we intend to use a
discount rate of 6.75% and an expected rate of return on assets assumption of
8.5%. The most significant assumption used in developing our 2002 postemployment
plan expense was the assumed rate of involuntary turnover of 4%. The involuntary
turnover rate is based on historical trends and projections of involuntary
turnover in the future. Our historical assumption has been 3.5%; however, due to
reengineering activities that increased our recent involuntary turnover rate and
our projection of involuntary turnover, we raised our rate to 4%. A 0.25% change
in the rate of involuntary turnover would have increased or decreased pre-tax
2002 expense by approximately $4 million.

Environmental and Legal Contingencies Each quarter, we review the status of each
claim and legal proceeding and assess our potential financial exposure. If the
potential loss from any claim or legal proceeding is considered probable and the
amount can be reasonably estimated, we accrue a liability for the estimated
loss, in accordance with Statement of Financial Accounting Standards No. 5 (SFAS
5), "Accounting for Contingencies." To the extent the amount of a probable loss
is estimable only by reference to a range of equally probable outcomes, and no
amount within the range appears to be a better estimate than any other amount,
we accrue for the low end of the range. Because of uncertainties related to
these matters, the use of estimates, assumptions, judgments and external factors
beyond our control, accruals are based on the best information available at the
time. As additional information becomes available, we reassess the potential
liability related to our pending claims and litigation and may revise our
estimates. Such revisions in the estimates of the potential liabilities could
have a material impact on our results of operations and financial position. When
insurance carriers or third-parties have agreed to pay any amounts related to
costs, and we believe that it is probable that we can collect such amounts,
those amounts would be reflected as receivables in our consolidated financial
statements.

The most significant legal contingency impacting our company relates to the Fox
River matter, which is further described in detail in Note 11 of Notes to
Consolidated Financial Statements. This matter impacts our company overall and
does not affect the financial results of any one of its segments. As described
in Note 11, NCR was identified as a potentially responsible party (PRP) at the
Fox River site in Wisconsin, because of polychlorinated biphenyl (PCB)
discharges from two carbonless paper manufacturing facilities previously owned
by NCR located along the Fox River. Some parties contend that NCR is also
responsible for PCB discharges from paper mills owned by other companies because
carbonless paper manufactured by NCR was purchased by those mills as a raw
material for their paper making processes. NCR sold the facilities in 1978 to
the present owner, Appleton Papers Inc. (API), which has also been identified as
a PRP. The other Fox River PRPs include P.H. Glatfelter Company, Georgia Pacific
(formerly Fort James), WTM1 Co. (formerly Wisconsin Tissue, now owned by
Chesapeake Corporation), Riverside Paper Corporation, and U.S. Paper Mills Corp.
(owned by Sonoco Products Company).

As of the end of 2002, our reserve for the Fox River matter was approximately
$56 million. In 2001, we increased our reserve to account for the government's
proposed clean-up plan, which included certain estimates regarding the total
clean-up costs associated with the Fox River, among other things. We regularly
re-evaluate the assumptions we use in determining the appropriate reserve for
the Fox River matter as additional information becomes available and, when
warranted, make appropriate adjustments.

The extent of our potential liability has been highly uncertain and continues to
be so at this time. Our eventual liability - which we expect will be paid out
over the next 20-40 or more years - will depend on a number of factors. In
general, these factors include: (1) the total clean-up costs for the site; (2)
the total natural resource damages for the site; (3) the share NCR and API will
jointly bear of the total clean-up costs and natural resource damages; as former
and current owners of paper manufacturing facilities along the Fox River (4) the
share NCR will bear of the joint NCR/API payments for clean-up costs and natural
resource damages; and (5) our transaction costs to defend our company in this
matter. In setting our reserve, we have attempted to estimate a range of
reasonably possible outcomes for each of these factors, although each range is
itself highly uncertain. We use our best

22



estimate within the range if that is possible. Where there is a range of equally
probable outcomes, and there is no amount within that range that appears to be a
better estimate than any other amount, we use the low-end of the range. Each of
these factors is discussed below:

.. For the first factor described above, total clean-up costs for the site, we
determined that there is a range of equally probable outcomes, and that no
estimate within that range was better than the other estimates.
Accordingly, we used the low-end of that range, which was the government's
estimate of the clean-up costs as set forth in the proposed clean-up plan.
This amount was $370 million; however there can be no assurances that this
amount will not be significantly higher. For example, one consultant has
expressed an opinion that total clean-up costs for the site could be
approximately $1.1 billion. In relying on the government estimates for
clean-up costs, we assumed that neither the amount of dredging undertaken
nor the cost per cubic yard of the dredging will vary significantly from
the amounts contained in the proposed plan. The goverment's final clean-up
plan for the first two areas of the Fox River that was released in January
2003 is generally consistent with the estimates for the corresponding
portions of its proposed plan.

.. Second, for total natural resource damages, we also determined that there
is a range of equally probable outcomes, and that no estimate within that
range was better than the other estimates. Accordingly, we used the low-end
of that range, which was the lowest estimate in a 2000 government report on
natural resource damages. This amount was $176 million.

.. Third, for the NCR/API share of clean-up costs and natural resource
damages, we examined figures developed by several independent,
nationally-recognized engineering and paper-industry experts, along with
those set forth in draft government reports. Again, we determined that
there is a range of equally probable outcomes, and that no estimate within
that range was better than the other estimates. Accordingly, we used the
low-end of that range, which was primarily an estimate of the joint NCR/API
percentage of direct discharges of PCBs to the river.

.. Fourth, for our share of the joint NCR/API payments, we estimated we would
pay approximately half of the total costs jointly attributable to NCR/API.
This is based on a sharing agreement between us and API, the terms of which
are confidential. This factor assumes that API is able to pay its share of
the NCR/API joint share.

.. Finally, for our transaction costs to defend this matter, we estimated the
costs we are likely to incur over the four-year period covered by the
NCR/API interim settlement with the government (which is described below).
This estimate is based on our costs since this matter first arose in 1995
and estimates of what our defense costs will be in the future.

We do not expect there to be any significant near-term changes to any of the
above-described assumptions that are likely to have a material effect on the
amount of our accrual. However, there are other estimates for each of these
factors which are significantly higher than the estimates described above. We
believe there is such uncertainty surrounding these estimates that we cannot
quantify the high-end of the range of such estimates. In any event, assuming,
for example, that the above described assumptions are each doubled, our payments
for the potential liabilities for the Fox River matter would be approximately
$255 million (to be paid out over the next 20-40 or more years). AT&T Corp. and
Lucent Technologies, Inc. are jointly responsible for indemnifying us for a
portion of amounts incurred by our company over a certain threshold, and the
$255 million estimate assumes they will make such payments. If we were in fact
required to pay an amount such as $255 million for NCR's share of the Fox River
liabilities, it would have a minimal impact on our liquidity and capital
resources, assuming that such amount was required to be paid over the time frame
currently contemplated. However, if such an amount were required to be paid in a
shorter time period, it could have a material impact on our liquidity or capital
resources.

We have discussed above our overall, long-term exposure to the Fox River
liability. However, as described in Note 11 of Notes to Consolidated Financial
Statements, we also have limited short-term liability for this matter. In
December 2001, NCR and API entered into an interim settlement with the
governmental agencies that limits NCR/API's joint cash payouts to $10.375
million per year over a four-year period beginning at the time of such interim
settlement. Any portion of an annual $10.375 million installment not paid out in
a given year will be rolled over and made available for payment during
subsequent years up until December 10, 2005. These payments are being shared by
us and API under the terms of the confidential settlement agreement discussed
above and will be credited against our long-term exposure for this matter.

Investment in Marketable Securities We typically classify our marketable
securities as available-for-sale and account for them at fair value with net
unrealized gains or losses reported, net-of-tax, within stockholders' equity. If
a decline in the fair value of a marketable security is deemed by us to be other
than temporary, the cost basis of the investment is written down to estimated
fair value, and the amount of the write-down is included in the determination of
income. The determination of whether a decline in the fair market value is to be
other than temporary requires a significant amount of judgment and is based on
historical experience and upon information available to us at the time. However,
because future events relating to marketable securities cannot be determined
with absolute certainty, our decision to recognize a loss may be premature or we
may fail to a make a timely adjustment, impacting future earnings. During the
fourth quarter of 2002, we recognized a pre-tax loss of $14 million for
investments in marketable securities in Japan. Currently, we do not anticipate
any near-term changes in the fair market value of our marketable securities and
any changes in the fair market value would be immaterial.

23



Income Taxes We account for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes," which recognizes deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and the tax basis
of assets and liabilities. The deferred tax assets and liabilities are
determined based on the enacted tax rates expected to apply in the periods in
which the deferred tax assets or liabilities are expected to be settled or
realized.

We regularly review our deferred tax assets for recoverability and establish a
valuation allowance if it is more likely than not that some portion or all of a
deferred tax asset will not be realized. The determination as to whether a
deferred tax asset will be realized is made on a jurisdictional basis and is
based on the evaluation of positive and negative evidence. This evidence
includes historical taxable income, projected future taxable income, the
expected timing of the reversal of existing temporary differences and the
implementation of tax planning strategies. Projected future taxable income is
based on our expected results and assumptions as to which jurisdiction the
income will be earned. The expected timing of the reversals of existing
temporary differences is based on current tax law and our tax methods of
accounting. We also review our liabilities under SFAS No. 5 which requires an
accrual for estimated losses when it is probable that a liability has been
incurred and the amount can be reasonably estimated. These projections and
estimates may change in the future as actual results become known.

If we are unable to generate sufficient future taxable income, or if there is a
material change in the actual effective tax rates or the time period within
which the underlying temporary differences become taxable or deductible, or if
the tax laws change unfavorably, then we could be required to increase our
valuation allowance against our deferred tax assets, resulting in an increase in
our effective tax rate. The impact to our effective tax rate would be an
increase of one percentage point for each increase of $1 million to the
valuation allowance as of December 31, 2002.

We have a valuation allowance of $357 million as of December 31, 2002 related to
certain deferred income tax assets, primarily tax loss carryforwards, in
jurisdictions where there is uncertainty as to ultimate realization of a benefit
from those tax assets. As of December 31, 2001, the valuation allowance was $281
million.

Impairment of Long-Lived Assets In accordance with Statement of Financial
Accounting Standards No. 144 (SFAS 144), "Accounting for the Impairment or
Disposal of Long-Lived Assets," long-lived assets to be held and used are
reviewed for impairment whenever events or circumstances indicate that the
carrying amount may not be recoverable. When required, impairment losses on
assets to be held and used are recognized based on the fair value of the asset.
We determine the fair value of these assets based upon estimates of future cash
flows, market value of similar assets, if available, or independent appraisals,
if required. In analyzing the fair value and recoverability using future cash
flows, we make projections based on a number of assumptions and estimates of
growth rates, future economic conditions, assignment of discount rates and
estimates of terminal values. An impairment loss is recognized if the carrying
amount of the long-lived asset is not recoverable from its undiscounted cash
flows. The measurement of impairment loss is the difference between the carrying
amount and fair value of the asset. This policy is applied to all of our
segments. Long-lived assets to be disposed of and/or held for sale are reported
at the lower of carrying amount or fair value less cost to sell. We determine
the fair value of these assets in the same manner as described for assets held
and used.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 141 (SFAS 141), "Business Combinations" and SFAS 142 in
June 2001. SFAS 141 specifies criteria that intangible assets acquired in a
purchase method business combination must be recognized and reported apart from
goodwill. SFAS 142 requires that goodwill no longer be amortized, but instead be
tested for impairment at least annually. SFAS 142 also requires intangible
assets with definite useful lives to continue to be amortized over their
respective useful lives and be tested for impairment whenever events and
circumstances indicate that the carrying amount may not be recoverable.
Indefinite life intangible assets must be tested annually to determine whether
events or circumstances continue to support the indefinite useful life. If the
intangible asset is subsequently determined to have a finite useful life, the
asset shall be tested for impairment in accordance with SFAS 144. Similar to
goodwill, the assessment of impairment for intangible assets requires estimates
of future cash flows. To the extent the carrying value of the assets exceed
their fair value, an impairment loss would be recorded. See Note 5 of Notes to
Consolidated Financial Statements for our disclosure regarding intangible assets
and goodwill.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

A discussion of recently issued accounting pronouncements is described in Note 1
of Notes to Consolidated Financial Statements and we incorporate such discussion
in this Management's Discussion and Analysis of Financial Condition and Results
of Operations by reference and make it a part hereof.

Item 7.(a) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, including changes in foreign currency exchange
rates and interest rates. We use a variety of measures to monitor and manage
these risks, including derivative financial instruments. Since a substantial
portion of our operations and revenue occur outside the United States, and in
currencies other than the U.S. dollar, our results can be significantly impacted
by changes in foreign currency exchange rates. To manage our exposures and
mitigate the impact of

24



currency fluctuations on the operations of our foreign subsidiaries, we hedge
our main transactional exposures through the use of foreign exchange forward
contracts and options. This is primarily done through the hedging of
foreign-currency-denominated inter-company inventory purchases by the marketing
units and of foreign-currency-denominated inventory sales by the manufacturing
units, and of certain financing transactions that are firmly committed or
forecasted. These foreign exchange contracts are designated as cash flow hedges,
and the gains or losses are deferred in other comprehensive income and
recognized in the determination of income when the underlying hedged transaction
impacts earnings. As we hedge inventory purchases, the ultimate gain or loss
from the derivative contract is recorded in cost of sales when the inventory is
sold to an unrelated third party.

Our strategy is to hedge, on behalf of each subsidiary, our non-functional
currency denominated cash flows for a period of up to 12 months. In this way,
much of the impact of currency fluctuations on non-functional currency
denominated transactions (and hence on subsidiary operating income as stated in
the functional currency) is mitigated in the near term. In the longer-term
(longer than the hedging period of up to 12 months) the subsidiaries are still
subject to the impacts of foreign currency fluctuations. In addition, the
subsidiary results are still subject to any impact of translating the functional
currency results to U.S. dollars. When hedging certain foreign currency
transactions of a long-term investment nature (net investments in foreign
operations), gains and losses are recorded in the currency translation
adjustment component of stockholders' equity. Gains and losses on other foreign
exchange contracts are recognized in other income or expense as exchange rates
change.

For purposes of potential risk analysis, we use sensitivity analysis to quantify
potential impacts that market rate changes may have on the fair values of our
hedge portfolio related to firmly committed or forecasted transactions. The
sensitivity analysis represents the hypothetical changes in value of the hedge
position and does not reflect the related gain or loss on the forecasted
underlying transaction. A 10% appreciation in the value of the U.S. dollar
against foreign currencies from the prevailing market rates would result in a $7
million increase or a $41 million increase in the fair value of the hedge
portfolio as of December 31, 2002 and 2001, respectively. Conversely, a 10%
depreciation of the U.S. dollar against foreign currencies from the prevailing
market rates would result in a $7 million decrease or a $9 million decrease in
the fair value of the hedge portfolio as of December 31, 2002 and 2001,
respectively.

The interest rate risk associated with our borrowing and investing activities at
December 31, 2002, was not material in relation to our consolidated financial
position, results of operations or cash flows. Historically, we have not used
derivative financial instruments to alter the interest rate characteristics of
our investment holdings or debt instruments but could do so in the future.

We utilize non-exchange traded financial instruments such as foreign exchange
forward contracts and options that we purchase exclusively from highly-rated
financial institutions. Additionally, we utilize put option contracts that are
not exchange traded as described in Note 8 of Notes to Consolidated Financial
Statements. With respect to foreign exchange contracts, we record these on our
balance sheet at fair market value based upon market-price quotations from the
financial institutions. We do not enter into non-exchange traded contracts that
require the use of fair value estimation techniques, but if we did, they could
have a material impact on our financial results. Also, we do not enter into
hedges for speculative purposes.

We are potentially subject to concentrations of credit risk on accounts
receivable and financial instruments such as hedging instruments, short-term
investments, and cash and cash equivalents. Credit risk includes the risk of
nonperformance by counterparties. The maximum potential loss may exceed the
amount recognized on the balance sheet. Exposure to credit risk is managed
through credit approvals, credit limits, selecting major international financial
institutions (as counterparties to hedging transactions) and monitoring
procedures. Our business often involves large transactions with customers for
which we do not require collateral, and if one or more of those customers were
to default on its obligations under applicable contractual arrangements, we
could be exposed to potentially significant losses. Moreover, the continued
downturn in the global economy could have an adverse impact on the ability of
our customers to pay their obligations on a timely basis. However, we believe
that the reserves for potential losses are adequate. At December 31, 2002 and
2001, we did not have any major concentration of credit risk related to
financial instruments.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of NCR, the notes to such financial
statements, the report of PricewaterhouseCoopers LLP dated January 20, 2003 and
the selected financial data as included in NCR's 2002 Annual Report to
Stockholders, are incorporated herein by reference.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISLCOSURE

None.

25



PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Most of the information required by this Item with respect to directors of NCR
is included on pages 7-8 of NCR's Proxy Statement, dated March 13, 2003, and is
incorporated herein by reference. In addition, the following information is
provided with respect to Mr. Robbins, an NCR director who has chosen not to
stand for re-election at the Company's 2003 Annual Meeting of Stockholders:

James O. Robbins, 60, has served as President and Chief Executive Officer of Cox
Communications, Inc., a broadband communications company, since 1994. He was
President of the Cable Division of Cox Enterprises, Inc., from 1985 to 1994. Mr.
Robbins is a director of Cox Communications, Inc., and serves on the Advisory
Board of Forstmann Little and Co. and as a trustee of STI Classic Funds and STI
Classic Variable Trust. He became a director of NCR on January 1, 1997.

Information regarding Executive Officers is furnished in a separate disclosure
in Part I of this report because the Company did not furnish such information in
its definitive proxy statement prepared in accordance with Schedule 14A.

Information regarding Section 16(a) beneficial ownership reporting compliance of
the Company's executive officers and directors is included in the material
captioned "Section 16(a) Beneficial Ownership Reporting Compliance" on page 12
of NCR's Proxy Statement, dated March 13, 2003, and is incorporated herein by
reference.

Information regarding NCR's determination of an "audit committee financial
expert" is included in the material captioned "Committees of the Board" on page
10 of NCR's Proxy Statement, dated March 13, 2003, and is incorporated herein by
reference.

Item 11. EXECUTIVE COMPENSATION

The information regarding the Company's compensation of its named executive
officers is included in the material captioned "Executive Compensation" on pages
14-21 of NCR's Proxy Statement, dated March 13, 2003, and is incorporated herein
by reference. The information regarding the Company's compensation of its
directors is included in the material captioned "Compensation of Directors" on
pages 11-12 of NCR's Proxy Statement, dated March 13, 2003, and is incorporated
herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding security ownership of certain beneficial owners and
management is included in the material captioned "Stock Ownership" on pages 4-5
of NCR's Proxy Statement, dated March 13, 2003, and is incorporated herein by
reference.

The table below shows a high-level summary of aggregate equity compensation
plans:

Equity Compensation Plan Information



Number of securities
remaining available
for future issuance
Number of securities to Weighted average under equity
be issued upon exercise exercise price of compensation plans
of outstanding options, outstanding options, (excluding securities
warrants and rights warrants and rights reflected in column a)
----------------------- -------------------- ----------------------
Plan category (a) (b) (c)

Equity compensation plans approved by
security holders :

Management Stock Option Plans 1. 16,375,782 $38.21 8,827,204
Worldshares Stock Option Plan 2. 0 0 4,794,054

Equity compensation plans not approved by
security holders: N/A N/A N/A
---------- ------ ----------
Total 16,375,782 $38.21 13,621,258
========== ====== ==========


1. The Management Stock Option Plan was adopted with stockholder approval,
effective January 1, 1997. The plan contains an evergreen provision that
increases each year, the number of shares authorized by 4% of the
outstanding shares on the first day of the year for a ten-year term of the
plan without the need for additional board approval. There were 25,202,986
shares authorized under the plan at January 1, 2003.

2. The Worldshares Stock Option Plan was adopted with stockholder approval,
effective January 1, 1997. There were 6,694,854 shares authorized under the
plan at January 1, 2003. NCR granted 3,059,370 million options to
substantially all of its employees at December 31, 1996. These options had
a five-year expiration period that ended January 1, 2002. There were
1,900,800 shares exercised under this program, and the remaining 1,158,570
shares were canceled or expired.

26



Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

PART IV

Item 14. CONTROLS AND PROCEUDRES

NCR has established disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934 (the "Exchange
Act")) to ensure that information required to be disclosed by NCR in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms. Based on their evaluation, conducted in February 2003 under their
supervision and with the participation of management, the Company's Chief
Executive and Chief Financial Officers have concluded that, as of the date of
their evaluation, NCR's disclosure controls and procedures are effective, in all
material respects, to meet such objective and that NCR's disclosure controls and
procedures adequately alert them on a timely basis to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in NCR's Exchange Act filings.

In addition, there were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K:

(a) Index

1. Financial Statements: The following consolidated financial statements of the
Company and the Report of Independent Accountants and are incorporated by
reference in Part II, Item 8:



Page of
Annual Report
to
Stockholders
-------------

Report of Independent Auditors 26
Consolidated Statements of Operations for 2002, 2001 and 2000 27
Consolidated Balance Sheets at December 31, 2002 and 2001 28
Consolidated Statements of Cash Flow for 2002, 2001, 2000 29
Consolidated Statements of Stockholders' Equity for 2002, 2001, 2000 30
Notes to Consolidated Financial Statements 31


2. Financial Statement Schedule: Financial Statement Schedule II - Valuation and
Qualifying Accounts is included in this Report on Form 10-K. All other schedules
are not required under the related instructions or are not applicable.

3. Exhibits: See Index of Exhibits below for a listing of all exhibits to this
Report on Form 10-K.

(b) Reports on Form 8-K

1. NCR filed a Current Report on Form 8-K, dated November 13, 2002, which
reported under Item 9 of such form the filing on November 12, 2002, of the
Company's Quarterly Report on Form 10-Q for the period ended September 30, 2002,
accompanied by the Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Messrs.
Lars Nyberg and Earl Shanks, Chairman and Chief Executive Officer and Senior
Vice President and Chief Financial Officer of the Company, respectively.

2. NCR filed a Current Report on Form 8-K, dated November 27, 2002, which
reported under Item 9 of such form the publication on its web page of a
supplemental presentation showing restated operating results for each quarter of
2001 and 2002 using a new segment structure.

27



(c) Exhibits identified in parentheses below, on file with the SEC, are
incorporated herein by reference as exhibits hereto.

Exhibit No. Description
- ----------- -----------
3.1 Articles of Amendment and Restatement of NCR Corporation, as
amended May 14, 1999 (Exhibit 3.1 to the NCR Corporation Form
10-Q for the period ended June 30, 1999) and Articles of
Amendment and Restatement and Articles Supplementary of NCR
Corporation (Exhibit 3.1 to the NCR Corporation Annual Report on
Form 10-K for the year ended December 31, 1996 (the "1996 NCR
Annual Report")).

3.2 Bylaws of NCR Corporation, as amended and restated on January 22,
2003.

4.1 Common Stock Certificate of NCR Corporation (Exhibit 4.1 to the
NCR Corporation Annual Report on Form 10-K for the year ended
December 31, 1999 (the "1999 NCR Annual Report")).

4.2 Preferred Share Purchase Rights Plan of NCR Corporation, dated as
of December 31, 1996, by and between NCR Corporation and The
First National Bank of Boston (Exhibit 4.2 to the 1996 NCR Annual
Report).

4.3 NCR Corporation hereby agrees to furnish the Securities and
Exchange Commission, upon its request, a copy of any instrument
which defines the rights of holders of long-term debt of NCR
Corporation and all of its subsidiaries for which consolidated or
unconsolidated financial statements are required to be filed, and
which does not exceed 10% of the total assets of NCR Corporation
and its subsidiaries on a consolidated basis.

4.4 Indenture, dated as of June 1, 2002, between NCR Corporation and
The Bank of New York (Exhibit 3.2 to the NCR Corporation
Quarterly Report on Form 10-Q for the period ended June 30, 2002
(the "June 30, 2002 Quarterly Report")).

4.5 Registration Rights Agreement, dated June 6, 2002, by and between
NCR Corporation and Salomon Smith Barney Inc., Banc One Capital
Markets, Inc., BNY Capital Markets, Inc., Fleet Securities, Inc.,
J.P. Morgan Securities Inc. and McDonald Investments Inc.,
relating to $300,000,000 principal amount of 7.125% senior Notes
due 2009 (Exhibit 4.5 to the June 30, 2002 Quarterly Report).

4.6(a-c) Terms of 7.125% Senior Notes due 2009, including the form of
notes (Exhibit 4.6(a-c) to the June 30, 2002 Quarterly Report).

10.1 Separation and Distribution Agreement, dated as of February 1,
1996 and amended and restated as of March 29, 1996 (Exhibit 10.1
to the Lucent Technologies Inc. Registration Statement on Form
S-1 (No. 333-00703) (the "Lucent Registration Statement")).

10.2 Employee Benefits Agreement, dated as of November 20, 1996, by
and between AT&T Corp. and NCR Corporation (Exhibit 10.2 to the
1996 NCR Annual Report).

10.3 Patent License Agreement, effective as of March 29, 1996, by and
among AT&T Corp., NCR Corporation, and Lucent Technologies Inc.
(Exhibit 10.7 to the Lucent Registration Statement).

10.4 Amended and Restated Technology License Agreement, effective as
of March 29, 1996, by and among AT&T Corp., NCR Corporation, and
Lucent Technologies Inc. (Exhibit 10.8 to the Lucent Registration
Statement).

10.5 Tax Sharing Agreement, dated as of February 1, 1996, and amended
and restated as of March 29, 1996, by and among AT&T Corp., NCR
Corporation, and Lucent Technologies Inc. (Exhibit 10.6 to the
Lucent Registration Statement).

10.6 NCR Management Stock Plan (Exhibit 10.8 to the 1996 NCR Annual
Report).

10.7 NCR WorldShares Plan (Exhibit 10.9 to the 1996 NCR Annual
Report).

10.8.1 The Retirement Plan for Officers of NCR (Exhibit 10.11 to the NCR
Corporation Registration Statement on Form 10 (No. 001-00395),
dated November 25, 1996 (the "NCR Registration Statement")).

10.8.2 Second Amendment to the Retirement Plan for Officers of NCR
Corporation effective January 1, 2001 (Exhibit 10.1 to the NCR
Corporation Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001).

10.8.3 Third Amendment to the Retirement Plan for Officers of NCR
Corporation effective June 1, 2002.

28



(c) Exhibits (continued):

10.9 NCR Officer Plan effective June 1, 2002.

10.10 NCR Change-in-Control Severance Plan for Executive Officers
(Exhibit 10.16 to the 1996 NCR Annual Report).

10.11 Change-in-Control Agreement by and between NCR and Lars Nyberg
(Exhibit 10.2 to the NCR Corporation Quarterly Report on Form
10-Q for the quarter ended June 30, 1997).

10.12.1 NCR Director Compensation Program (Exhibit 10.18 to the 1996 NCR
Annual Report).

10.12.2 First Amendment to the NCR Director Compensation Program (Exhibit
10.14.1 to the 1999 NCR Annual Report).

10.12.3 Second Amendment to the NCR Director Compensation Program
(Exhibit 10.14.2 to the 1999 NCR Annual Report).

10.13 NCR Management Incentive Program (Exhibit 10.19 to the 1996
Annual Report).

10.14 NCR Supplemental Pension Plan for AT&T Transfers, restated
effective January 1, 1997 (Exhibit 10.1 to the NCR Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998 (the "March 31, 1998 Quarterly Report")).

10.15.1 NCR Mid-Career Hire Supplemental Pension Plan, restated effective
January 1, 1997 (Exhibit 10.2 to the March 31, 1998 Quarterly
Report).

10.15.2 Amendment to the Mid-Career Hire Supplemental Pension Plan
effective June 1, 2002.

10.16 NCR Nonqualified Excess Plan, restated effective January 1, 1996
(Exhibit 10.3 to the March 31, 1998 Quarterly Report).

10.17 NCR Change-In-Control Severance Plan for Key At-Risk Employees
adopted effective January 1, 2003.

10.18.1 Agreement and Plan of Merger by and among NCR Corporation, NCR
Merger Sub Inc. and 4Front Technologies, Inc. dated August 2,
2000 (Annex A from the 4Front Technologies, Inc. Notice of Annual
Meeting of Stockholders and Proxy Statement dated September 25,
2000).

10.18.2 Amendment to Agreement and Plan of Merger by and among NCR
Corporation, NCR Merger Sub Parent, Inc., NCR Merger Sub Inc.,
and 4Front Technologies, Inc. dated October 6, 2000 (Exhibit
10.1(b) to the NCR Corporation Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000).

10.18.3 Second Amendment to Agreement and Plan of Merger by NCR
Corporation and NCR Merger Sub Parent, Inc. dated May 1, 2001
(Exhibit 10.1(c) to the NCR Corporation Quarterly Report on Form
10-Q for the quarter ended June 30, 2001).

10.19 Purchase Agreement, dated June 6, 2002, by and between NCR
Corporation and Salomon Smith Barney Inc., Banc One Capital
Markets, Inc., BNY Capital Markets, Inc., Fleet Securities, Inc.,
J.P. Morgan Securities Inc. and McDonald Investments Inc.,
relating to $300,000,000 principal amount of 7.125% Senior Notes
due 2009 (Exhibit 10.1 to the June 30, 2002 Quarterly Report).

10.20 Employment Agreement with Lars Nyberg (Exhibit 10.22 to the 1999
NCR Annual Report).

10.21 Amended Letter Agreement with Lars Nyberg dated January 23, 2002
(Exhibit 10.18 to the NCR Corporation Annual Report on Form 10-K
for the year ended December 31, 2001).

10.22 Letter Agreement dated October 18, 2000 (Exhibit 10.26 to the NCR
Corporation Annual Report on Form 10-K for the year ended
December 31, 2000 (the "2000 Annual Report")).

10.23 Letter Agreement dated January 15, 2001 (Exhibit 10.27 to the
2000 Annual Report).

10.24 Letter agreement dated June 18, 2001 (Exhibit 10.2 to the NCR
Corporation Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001).

10.25 Letter agreement effective August 20, 2001 (Exhibit 10.2 to the
NCR Corporation Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001).

10.26 Letter agreement dated September 6, 2002 (Exhibit 10.2 to the NCR
Corporation Quarterly Report on Form 10-Q for the quarter ended
September 30, 2002).

29



(c) Exhibits (continued):

10.27 Letter agreement dated September 8, 2002 (Exhibit 10.3 to the NCR
Corporation Quarterly Report on Form 10-Q for the quarter ended
September 30, 2002).

10.28 Letter agreement dated March 6, 2003.

13 NCR's 2002 Annual Report to Stockholders.

21 Subsidiaries of NCR Corporation.

23.1 Consent of Independent Accountants.

99 Code of Conduct for associates of NCR Corporation.

30



NCR Corporation

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(In millions)



Column A Column B Column C Column D Column E
---------- ---------- ---------- ---------- ---------
Additions
Balance at Charged to Charged to Balance
Beginning Costs & Other at End
Description of Period Expenses Accounts Deductions of Period
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------


Year Ended December 31, 2002
Allowance for doubtful accounts $ 54 $ 7 $ -- $36 $ 25
Deferred tax asset valuation allowance 281 76 -- -- 357
Inventory valuation reserves 50 26 -- 25 51
Reserves related to business restructuring -- 8 -- -- 8

Year Ended December 31, 2001
Allowance for doubtful accounts $ 24 $67 $ -- $37 $ 54
Deferred tax asset valuation allowance 304 -- -- 23 281
Inventory valuation reserves 53 25 -- 28 50

Year Ended December 31, 2000
Allowance for doubtful accounts $ 31 $17 $ -- $24 $ 24
Deferred tax asset valuation allowance 285 -- 19 -- 304
Inventory valuation reserves 67 27 -- 41 53
Reserves related to business restructuring 73 -- (37) 36 --


31



REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders of NCR Corporation:

Our audits of the consolidated financial statements referred to in our report
dated January 20, 2003, appearing in the 2002 Annual Report to Stockholders of
NCR Corporation (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 15(a)(2) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP
Dayton, Ohio
January 20, 2003

32



SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

NCR CORPORATION


Date: March 13, 2003 By:


/s/ Earl Shanks
----------------------------------
Earl Shanks
Chief Financial Officer and
Senior Vice President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.



Signature Title
- --------- -----



/s/ Lars Nyberg
- ------------------------------
Lars Nyberg Chairman of the Board, Chief Executive Officer and President


/s/ Earl Shanks
- ------------------------------
Earl Shanks Chief Financial Officer and Senior Vice President
(Principal Financial and Accounting Officer)


/s/ Edward P. Boykin
- ------------------------------
Edward P. Boykin Director


/s/ Mark P. Frissora
- ------------------------------
Mark P. Frissora Director


/s/ David R. Holmes
- ------------------------------
David R. Holmes Director


/s/ Linda Fayne Levinson
- ------------------------------
Linda Fayne Levinson Director


/s/ James R. Long
- ------------------------------
James R. Long Director


/s/ C.K. Prahalad
- ------------------------------
C.K. Prahalad Director


/s/ James O. Robbins
- ------------------------------
James O. Robbins Director


/s/ William S. Stavropoulos
- ------------------------------
William S. Stavropoulos Director

Date: March 13, 2003


33



CERTIFICATIONS

I, Lars Nyberg, certify that:

1. I have reviewed this annual report on Form 10-K of NCR Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: March 13, 2003 /s/ Lars Nyberg
-----------------------------------------------
Lars Nyberg
Chairman of the Board,
Chief Executive Officer and President

34



CERTIFICATIONS (continued)

I, Earl Shanks, certify that:

1. I have reviewed this annual report on Form 10-K of NCR Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

d) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;

e) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

f) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

c) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

d) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.


Date: March 13, 2003 /s/ Earl Shanks
-----------------------------------------------
Earl Shanks
Senior Vice President
and Chief Financial Officer

35