Merchant And ISO Austerity Leads to Tough Quarter at VeriFone

Merchants and independent sales organizations just aren't in a buying mood, and that's hurting the top line of the largest U.S.-based point-of-sale terminal maker, VeriFone Holdings Inc. San Jose, Calif.-based VeriFone late Tuesday reported that revenues for its fiscal 2009 second quarter ended April 30 fell 13.5% to $201.6 million from $233 million a year earlier. The worldwide revenue fall-off was the worst in North America, where sales slipped 17% to $83.4 million from $99.9 million in fiscal 2008's second quarter. Results were nearly as bad in Europe, where revenues dropped 16% to $63.8 million. Latin American and Asia revenues fell by 1% and 15%, respectively. “Our revenue results continued to be challenged by the difficult global economic environment,” chief executive Douglas G. Bergeron said in a statement. “It is still too early to predict when VeriFone's revenue will rebound, but we remain confident of our earnings and cash-generation capabilities.” At an analysts' conference call, however, Bergeron said there were some bright spots in North America. While VeriFone's unit that serves small businesses through ISOs “had a tough quarter,” sales to multilane retailers increased by 25% from a year ago, Bergeron said. Large retailers are working to install POS equipment compliant with the Payment Card Industry data-security standard (PCI). “PCI compliance is currently the No. 1 priority of CIOs [chief information officers],” Bergeron said. Bergeron added, however, that petroleum retailers are easing off on payment-processing equipment purchases because Visa Inc. has said it will postpone assessing penalties until 2012 on gas stations that don't meet a key PCI deadline in 2010. And other merchants are adopting a “rice and beans” strategy and buying land-line based equipment rather than premium wireless solutions, Bergeron said. Despite the revenue decline, VeriFone managed to earn $18.6 million in the quarter compared to a loss of $18 million a year earlier. Expense controls and inventory reduction contributed to the bottom line, according to Bergeron.