Verifone Systems' sales start at the point of sale. The company
makes hardware and software for conducting non-cash transactions at
cash registers, gas pumps, on mobile devices, and other devices.
Users can swipe or insert cards or hold smart phones within range
to conduct transactions. It also provides smart card and check
readers, receipt printers, and internet commerce software for large
chains as well as small businesses. It also provides installation,
training, and other services. Customers include companies in the
hospitality, retail, and healthcare markets, as well as government
agencies. Verifone generates about 60% of sales outside the US. In
2018 the company was acquired by Francisco Partners, a private
equity firm, for $3.54 billion.
Change in Company Type
Verifone Systems was sold to Francisco Partners for $3.4 billion
and become a privately held company in2018. Verifone plans to
continue the shift from point-of-sale hardware to payment and
commerce tools under the wing of Francisco Partners. The company's
revenue has slumped and it's lost money in four of the past five
years. The deal closed in third quarter of 2018.
Operations
Verifone's systems segment, accounting for a shade under 60% of
revenue, sells point-of-sale electronic payment devices, security,
and encryption software, and certified payment software for
payments and commerce applications. The services segment, about 40%
of revenue, offers transaction services, managed services and
terminal management, payment-enabled media, in-taxi payment,
security, and other value-added services at the POS. The segment
also handles software development, installation and deployment,
warranty, post-sale support, repairs, and training.
Manufacturing is outsourced to third party contractors
concentrated in China and Brazil.
Geographic Reach
The US is Verifone's largest single market, accounting for about
40% of sales. More than 35% of sales come from Europe, the Middle
East, and Africa region, about 15% from Latin America, and about
10% from the Asia/Pacific region.
The company is headquartered in San Jose, California and has
offices and research facilities in Clearwater, Florida; Rocklin,
California; Alpharetta, Georgia; and Long Island City, New York.
International offices and research facilities are in Canada,
Mexico, Brazil, Europe, Asia, and Australia. The company has sales
in more than 150 countries.
Sales and Marketing
With clients ranging from small merchants to
government-sponsored payment processors, Verifone augments its
direct sales force with a network of distributors, resellers, and
systems integrators. The company's customers are financial
institutions, payment processors, large retailers, petroleum
companies, transportation companies, government organizations,
healthcare companies, quick service restaurants, smaller merchants,
and retailers. Its 10 largest customers account around 20% of the
total revenue.
Financial Performance
Verifone Systems has reported declining revenue in the past two
years after revenue peaked at $2 billion in 2015 as the company
rode a wave of installations of chip-enabled credit card readers
around the world. In 2017, the company's overall sales fell to
$1.87 billion from $1.99 billion in 2016. Revenue in the systems
segment was off 12% because of the reduced chip-enabled reader
sales. Revenue from the company's services segment rose 2% in 2017
because of increased demand for device-related and payment-related
services, particularly in Europe, the Middle East, and Africa.
Revenue decreased in the Taxi Solutions business, which Verifone
sold in December 2017, and the petroleum media business, which is
sold in April 2017.
In 2017, Verifone reported its fourth loss in the past five
years. The loss widened to more than $170 million in 2017 from
about $9 million in 2016. Although the company reduced costs in
sales and marketing, and general and administrative expenses, it
took charges of more than $140 million for restructuring.
The company ended 2017 with about $144 million in cash on hand,
the third year of cash declines.
Strategy
Verifone had benefited from a general trend away from cash and
check transactions toward electronic credit and debit payments. In
another transition, software is used handle more payment tasks
while less is dependent on transaction hardware (though hardware is
still the gateway for Verifone revenue). That can be seen in
Verifone's revenue statement where systems sales decrease while
services rise.
To help it devote more resources to developing services, the
company restructured in 2017, reducing headcount, exiting
under-performing businesses, and consolidating facilities. During
the year, Verifone sold the Taxi Solutions and Petro Media
units.
The Carbon iPOS (for integrated Point of Sale) is a
comprehensive electronic point product that includes value-added
services for small and medium-businesses. The Engage platform
replaces Verifone's multilane, portable, and countertop devices. It
has capabilities for running applications and multimedia for a
richer consumer experience. The company also rolled out a mobile
point-of-sale system called mPOS.
Verifone is pushing to increase the number of connected
terminals in the field, which contribute to growing recurring
revenue. At the end of 2017, there were nearly 2 million connected
terminals, out of a total of 30 million terminals.
Mergers and Acquisitions
In 2016 Verifone acquired AJB Software Design, a provider of
payment gateway and switching products for large merchants in the
US and Canada. The deal enables Verifone to offer customer for
flexibility and functionality in its devices.