Verifone Inc. chairman Hatim A. Tyabji described himself in an American Banker interview last spring as "lucidly crazy."
By the end of the summer, after the Redwood City, Calif., company had agreed to several certifiably unconventional transactions, some observers might have suggested that Mr. Tyabji drop the "lucidly."
In a few bold strokes, Mr. Tyabji and his management team relegated their traditional, rampantly profitable activity - manufacturing of credit and debit card authorization terminals - to the category of a "mature business."
Verifone's future lies in electronic commerce. The company spent more than $30 million this year to make that point. That's equal to a big chunk of its 1994 revenue of $309 million.
"This is not just a strategic shift," said Mr. Tyabji. "I am a pinch- penny. I don't spend this kind of money unless it goes absolutely to the core of what we do."
The core is changing in a big way.
Of that investment in the future, $28 million went into the acquisition of Enterprise Integration Technologies, an influential provider of software for the Internet. That Menlo Park, Calif., company drew raves for its key role in the CommerceNet system, which more than 150 major banks and other corporations are using to prove the Internet's commercial feasibility.
As CommerceNet and other such exploratory ventures make clear, Verifone is far from alone in seeing hope and promise on the Internet's World Wide Web and other emerging interactive media. Older and weightier companies - AT&T, Electronic Data Systems, First Data, MCI - are also likely to have some say in how the future shapes up.
Still, the information superhighway is nowhere near completion, and Verifone would seem to have its hands full with old business. Through the first half of 1995, revenues were still growing at a brisk 20% as Verifone terminals continued to spread to new types of merchants and developing markets outside the United States. Profits also were up 20%, to $14 million.
Perhaps Mr. Tyabji is applying a fundamental lesson ofVerifone history, starting in 1981 when the credit card authorization system was in its infancy and no one latched onto the opportunity the way Verifone did. It became the dominant vendor of low-cost card-reading devices, 4.5 million of them now in place worldwide.
It may have required a leap of faith to see a parallel in Internet commerce. Verifone's radical new direction puzzled officials at Hypercom Inc., its closest competitor in the point of sale field, who pointedly noted that they intended to stay focused on the business at hand.
But Verifone's moves were rooted in its culture as well as its history. In 1994, Mr. Tyabji's predecessor, Verifone founder and board member William N. Melton, formed Cybercash Inc., a Reston, Va., company that aims to promote secure payments by credit card and other means on the World Wide Web.
Within a week of Verifone's announcement in August that it would acquire Enterprise Integration Technologies, Verifone said it would make a $4 million equity investment in Cybercash and get a seat on Cybercash's board.
Also this year, Verifone began working with BroadVision Inc. on a "virtual POS terminal" for electronic commerce, and it joined the Object Definition Alliance, a multi-industry coalition organized by Oracle Corp. to promote technical and commercial standards for multimedia systems.
These are building blocks of what Verifone vice president Roger B. Bertman described as "a strategy to extend the same payment functionality that we now offer at the physical retail sales counter to the virtual world of the Internet."
To pull it all together, Mr. Tyabji formed an Internet Commerce Division and named as general manager Mr. Bertman, a former AT&T and Tandem Computers executive who previously headed corporate development. It was Mr. Bertman who pursued and captured Enterprise Integration Technologies, and in keeping with the frenetic pace of life in cyberspace, it happened fast.
Mr. Bertman began researching electronic commerce only within the last year, he said at a September seminar during which Verifone unveiled what it called its "end-to-end Internet commerce solution."
"We quickly got focused on the Internet and the business case and alliances necessary to make that happen," Mr. Bertman said. "The people involved in the Internet and the world of interactive networks were not familiar with a lot of the security issues that had to be addressed."
Enterprise, a privately held, five-year-old company, was addressing security issues as intensely as anyone. Aside from serving as CommerceNet project manager, it joined with data encryption leader RSA Data Security Inc. in creating Terisa Systems to develop secure transaction technology. Terisa last April sold stakes to America Online, Compuserve, Prodigy, and Netscape, bringing Enterprise - and now, by extension, Verifone - more decidedly into the Internet mainstream.
In June, Mr. Bertman introduced Mr. Tyabji to Jay M. "Marty" Tenenbaum, 52, Enterprise's founder and chief executive.
Mr. Tenenbaum recalled that Mr. Tyabji said, "Let's take a week to figure out if we should go forward, and if it makes sense, let's just do it."
They announced their agreement Aug. 21 and Enterprise's 45 employees were essentially integrated into Verifone's Internet Commerce Division - comprising the bulk of it - before the transaction closed Nov. 8.
"We expect (the division) to be up to 100 people by the middle of 1996," Mr. Tenenbaum said. "Verifone is serious about being a key player in electronic commerce."
Given that iconoclasm is the norm at Verifone, the marriage, however improbable, makes some synergistic sense.
"Before the acquisition we were working together on a project, and neither of us felt we could do everything alone," said Mr. Tenenbaum, a computer scientist educated at MIT and Stanford who is an authority on artificial-intelligence technology.
"I didn't have (Verifone's) distribution channels, development organization, or credibility," he said. "And Verifone didn't know squat about the Internet."
In Enterprise Integration Technologies, Verifone is getting far more than Internet knowledge. Mr. Tenenbaum, adding the title of vice president of the parent, said he will be delivering to Mr. Tyabji "a broad strategic view of Verifone's assets and how to bring them all together."
One obvious possibility, he said, would be to combine chip cards with computerized devices in the home.
"Verifone actually owns the trademark Personal ATM," Mr. Tenenbaum said. "I intend to put some meaning behind that idea."
Drawing on his research and development background at SRI International and Schlumberger, Mr. Tenenbaum also is organizing Verifone's first R&D function, to explore more speculative, longer-range opportunities. But he is fundamentally after nothing more complicated than the original Verifone "gray box" at the point of sale. Its first incarnation won't be physical.
A "software solution" will be out by yearend, he said, followed by hardware in 1996 or 1997. If its "payment transaction application layer" works like the gray box, it will bridge existing payment systems to the Internet and be incorporated in new devices like electronic wallets. Technologies will coexist and transactions will flow securely across systems, with formal standardization processes kept to a minimum.
"Software is quite capable of providing the unified front," Mr. Tenenbaum said. "My expectation is that the industry will be rational and people won't go out of their way to prevent interoperability." And Verifone-EIT will be egging them on.
