Digital Transactions Authoritative, insightful and timely information for payments professionals
By Jim Daly
@DTPaymentNews
Payment technology provider VeriFone Systems Inc. reported Thursday that it plans to divest its line of products for taxicab payments and media services, and will take a minority interest in a joint venture that will own its current business in China.
News of those developments came as the leading U.S.-based point-of-sale terminal maker reported an $89.3 million loss for its second quarter of fiscal 2017 ended April 30 versus a $2.9 million profit a year earlier. The latest quarter included $86.3 million in restructuring and goodwill-impairment charges related to the developments.
VeriFone is cutting back on what it has determined to be marginal market segments such as taxis and fuel-pump media—it recently formed a joint venture with Gas Station TV to take over its fuel-pump media business—and tough international markets such as China in order to concentrate on new products. The reordering comes as VeriFone begins to recover from lower-than-expected revenues generated by the U.S. conversion to EMV chip cards.
“VeriFone’s most important strategic goal for 2017 remains the successful launch of our next-generation solutions, and I’m encouraged by our progress and the growth of the sales pipeline for our new Engage, Carbon, and mobile platforms,” chief executive Paul Galant said on a conference call with analysts.
Engage and Carbon are two of several new product lines that San Jose, Calif.-based VeriFone has in the works and which are in various stages of rollout. Galant said six of Germany’s eight largest payment-services providers have certified Engage and are rolling the line out to their customers.
VeriFone indicated earlier that it was evaluating its payment and media-services product line for taxicabs, and now it plans to divest it. The company already has received inquiries from possible buyers, according to Galant.
“To compete and grow this business on a global basis requires focus and additional resources and capital,” he said. “As such, we believe that we are not the ideal steward to drive the next chapter of growth of the taxi business given our strategic priority to scale our next-generation solutions.”
And while many U.S. companies are seeking fortune in China, not so VeriFone. The company has long reported tough sledding in the world’s largest country, and now it plans to sell a majority stake in its business there to a China-based entity.
“Despite achieving recent share gains with the top Chinese banks and the largest ISO, we see increasing barriers to doing business in China as a public U.S. technology company,” Galant said. “Furthermore, we now see a greater than expected slowdown in demand for payment terminals, and unacceptable long-term profitability.”
Later in the call Galant said that China had been a hot growth market for a number of years, having had only four POS terminals per 1,000 population in 2011 but 19 now. Growth, however, is down by 50%, and he added that “we expect that to continue to decline.”
VeriFone has not yet determined how big its interest in the Chinese joint venture will be, but it could be 20% or less, according to chief financial officer Marc Rothman. “It’s still a work in progress,” Rothman said on the call.
Meanwhile, after having been stung by a slower-than-expected conversion of small and mid-size U.S. merchants to EMV chip card-accepting terminals, VeriFone reported that revenues in its small-business segment grew sequentially for the first time in five quarters. The North American retailer business grew 12%, in part because of some significant deployments at quick-service restaurants.
VeriFone reported total revenues of $473.7 million in the second quarter, down 10% from $526.3 million a year earlier. In North America, VeriFone’s largest region, revenues fell nearly 25% to $157.4 million, in large part due to EMV issues, including the payment card networks’ three-year delay in their EMV fuel-pump liability shifts to October 2020. Smaller gas-station operators have delayed their conversions, according to Galant, and even some larger operators that had begun converting have put their projects on hold.
