NCR Corp. (NCR) is taking advantage of the shrinking bricks-and-mortar movie rental business by tracking Blockbuster Inc.'s (BBI, BBIB) widespread store closures to position its own DVD kiosks.

NCR, best known as a maker of automated teller machines and cash registers, is a recent entrant into the self-serve DVD rental arena. The company, which licenses the Blockbuster Express brand for its kiosks, plans to more than double its presence to 10,000 kiosks nationwide by the end of this year. But NCR isn't the only one with its eye on markets Blockbuster is vacating and could face stiff competition as it seeks to increase its presence.

"We know where the stores close," said Alex Camara, vice president and general manager of NCR Entertainment, saying that the company has been strategic in placing kiosks around those locations. While NCR doesn't have a defined number of kiosks it wants to place in each market, Camara said, "We're pretty aggressive."

Camara said NCR has been acting in a similar fashion in response to Hollywood Video store closures. Movie Gallery Inc. (MVGRQ) is in the process of closing a number of Movie Gallery and Hollywood Video locations after filing for Chapter 11 bankruptcy protection in February.

Jeff Dudash, an NCR spokesman, noted that NCR partners with other retailers, including Sheetz Inc. and Publix Super Markets Inc. (PUSH), to actually house the kiosks. Camara said the company will determine how many kiosks it wants to add to a market, then approach the retailers regarding space.

J.P. Morgan analyst Paul Coster believes NCR could be putting up to four kiosks in each of the 500-plus markets that Blockbuster leaves this year. NCR is "taking advantage of Blockbuster's withdrawal," Coster wrote in a note to investors.

Blockbuster spokeswoman Michelle Metzger said NCR is aware of where the stores are closing, and "That certainly would be a good strategy to put kiosks there."

Even though NCR has an in with Blockbuster, that doesn't guarantee it will fill any void the rental company leaves as it downsizes to help meet massive debt obligations. Coinstar Inc.'s (CSTR) Redbox Automated Retail is also growing quickly with kiosks in more than 20,000 grocery stores, retailers and even McDonald's Corp. (MCD) outlets. Both brands of kiosks rent out DVDs for $1 per night.

Gil Luria, an analyst with Wedbush Securities, expects NCR would place no more than two kiosks in a given strip mall as Blockbuster leaves the area. "But that assumes they get there before Redbox," he said.

A representative from Redbox wasn't immediately available for comment.

While both NCR and Redbox have plenty of room to grow without the market getting too crowded, Luria said, "We're getting closer to that point of saturation."

Shares of NCR were recently trading down 0.2% at $15.07 and are up 35% so far this year.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com
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