Intelidata Chopping Back to Stem Downturn

Investors have put Intelidata Technologies Corp. in the doghouse, but the company hopes to return to financial health soon.

Shares of the interactive technology company have languished around $3 in recent months, down from about $10 a year ago. In August the Herndon, Va.-based company reported a second-quarter loss of 9 cents a share. Investors had expected Intelidata, which sells home banking, shopping, and telecommunications products, to earn 4 cents.

"From an investor's perspective, 1997 has been a disappointment across the board for home banking technology providers," said Intelidata president John C. Backus.

Next year will be different, he said, as banks take back much of the business they handed off to third parties.

Mr. Backus said bankers will ask themselves, "Why in the world did I outsource the data warehouse?"-which contains their crucial customer information. Intelidata, among others, might help banks consolidate that control.

Intelidata, however, faces near-term challenges as a vendor of technology to banks rather than to end users. Like the banks, it is waiting for Microsoft Corp., Intuit Inc., Integrion Financial Network, and others to reach agreements on technical standards that will encourage more significant technology investments.

"The dust will settle by the end of this year," Mr. Backus said. "Standards are painful to develop but good for the industry when they do develop."

He said Intelidata has the potential to sell tens of millions of dollars worth of its Interpose Financial Engine over the next six months. The system can integrate with a variety of applications, such as Intuit's Quicken software or Checkfree Corp.'s back-end system for payment processing.

Interpose servers, data warehouses, and associated banking applications are installed at 23 of the top 100 banks. "I'd like to end this year with 30 of the top 100, and next year with 50 of the top 100," Mr. Backus said. "I think we'll get there."

But observers question the logic behind Intelidata's 1996 acquisition of Colonial Data Technologies, a telephone and network services provider, which has apparently hampered the strategy. The revenues Intelidata had expected from Colonial's Caller ID equipment failed to materialize as competitors offered similar products at cheaper prices.

Last week Intelidata announced a restructuring of its telecommunications operations. Intelidata, which employs 350 people, will reduce head count by about 15% and take a third-quarter charge of as much as $3 million.

It expects revenues and earnings in the next several quarters to be lower than previously predicted, but says the reorganization should save more than $6 million annually.

"The good story is the electronic banking opportunity," which could "pay off long-run," said Kevin J. Timmons, analyst at First Albany Corp., New York. "They have a presence with a fair number of the largest banks in the country."

Intelidata also has $23 million in cash, a lack of long-term debt, and made recent business changes to "squeeze more cash out of the balance sheet," Mr. Timmons said. "It's not like they are in a severe cash crunch."

He also pointed to intangibles such as management led by chairman William F. Gorog, who invented the Lexis-Nexis data archive system and had a hand in the early growth of Verifone Inc.

"The problems I faced previously have been reflected in the approach we are taking today," Mr. Gorog said.

He said bankers, enthralled by smart cards, interactive television, or the Internet, will still need banking systems that can deliver "complete versatility (and) handle any of these devices."

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