Sales to Gas Stations Help Fuel Revenue Gains for VeriFone

Already big inside the convenience stores at thousands of gas stations, point-of-sale terminal maker VeriFone Systems Inc. is making headway at gas pumps. VeriFone on Thursday reported that petroleum-industry revenues grew 58% in its fourth fiscal 2010 quarter ended Oct. 31 over the year-earlier period. The strong petroleum results helped lift VeriFone’s North American revenues by 40% to $122.1 million.

The most significant factor driving demand in VeriFone’s petroleum sector is the upgrading of gas pumps to meet higher security requirements, including the Payment Card Industry data-security standard (PCI), according to chief executive Douglas G. Bergeron. VeriFone is selling more of its Secure PumpPay devices that fit into existing pumps, meet current security requirements, and are built to resist tampering by fraudsters intent on installing skimmers that capture card numbers. VeriFone sold 5,000 such devices in 2010 but Bergeron thinks sales could double or triple in 2011. “The gasoline island is a new area of concentration for VeriFone and could represent total revenues of several hundred million dollars over the next three years,” Bergeron told analysts in a conference call Thursday afternoon.

Two years ago, VeriFone’s North American sales slumped 16% because of the weak economy. But merchants’ desire for PCI-compliant terminals in the U.S. as well as demand for new chip-and-PIN terminals in Canada are helping to rebuild sales in the region. North America accounted for 44% of VeriFone’s worldwide fourth-quarter revenues of $276 million, up 27% over $217.8 million in fiscal 2009’s fourth quarter. For the year, VeriFone’s revenues of a hair over $1 billion marked the first time the San Jose, Calif.-based company surpassed that milestone, up 19% from $844.7 million in fiscal 2009.

Bergeron said little about the company’s proposal to buy Scottsdale, Ariz.-based rival Hypercom Corp. for $485 million in stock (Digital Transactions News, Nov. 17). The deal needs approval by U.S. and European regulators as well as Hypercom’s shareholders, and Bergeron doesn’t expect it to close until 2011’s second half. At the same time, VeriFone is continuing its talks with Gemalto N.V. to possibly acquire Gemalto’s point-of-sale business and is working with the European company to accelerate chip-and-PIN (so-called EMV) card adoption in the U.S.

Meanwhile, services continue to capture a greater share of VeriFone’s sales as the company attempts to add steadier revenue streams than those generated solely from hardware sales. Services brought in $172.6 million in fiscal 2010, up 47% from $117.1 million in 2009. So-called System Solutions generated $828.9 million in revenues, an increase of 14% from $727.7 million a year earlier. Services accounted for 17% of revenues in fiscal 2010 compared with 14% the prior year.

VeriFone’s services consist of its data-protection systems such as VeriShield Protect for encrypting data, new mobile-payments services built around its PAYware Mobile products, and electronic-payment and media services for taxicabs. All generate transaction-based revenues. VeriFone is getting further traction by striking deals with other companies offering complementary services. For example, VeriFone will incorporate First Data Corp.’s TransArmor security system, which uses tokenization technology from EMC Corp.’s RSA division, into a security offering for petroleum and multilane retailers.

VeriFone also announced in the fourth quarter that it was integrating PayPal Inc. acceptance into its PAYware Mobile sleeve that enables merchants using Apple Inc.’s iPhone to accept credit and debit cards (Digital Transactions News, Oct. 26). The company also has a deal with mobile-payments provider Bling Nation Ltd.

Net income for the fourth quarter came in at $49.4 million compared with a $2.16 million loss a year earlier. For the year, net income improved to $98.8 million compared to a $157.5 million loss in fiscal 2009, much of which resulted from a one-time impairment charge.