Hewlett-Packard Co.'s agreement last week to acquire Verifone Inc. lit a fire under the corporate matchmakers in the transaction technology market.
Analysts and vendors alike said the Silicon Valley computer giant's $1.2 billion deal for the leading supplier of point of sale credit card terminals could hasten similar pairings among hardware and software suppliers and transaction processing specialists-all jockeying for position in the electronic commerce market.
Among those seen as acquirers are Deluxe Corp., Microsoft Corp., and First Data Corp., each intent on filling gaps in its on-line banking and payments arsenal.
Speculation about targets centers on Diebold Inc., Hypercom Corp., Transaction Systems Architects Inc., International Verifact Inc., Concord EFS Inc., Checkfree Corp., and Total System Services Inc.
Total System, majority-owned by Synovus Financial Corp. of Columbus, Ga., is No. 2 to First Data in credit card processing and trades at a price-earnings multiple above 70.
"There could be a race to put together those who are going to monopolize commerce on the Internet," said Craig Johnson, analyst at Piper Jaffray Inc., Minneapolis.
Gary R. Craft, analyst at Robertson Stephens & Co., San Francisco, said Hewlett-Packard scored a coup in snagging Verifone, because of that company's expertise in the migration of financial transactions "from the physical world to a virtual world."
Expanding from its core terminal business, which grew out of moves by Visa and MasterCard in the 1980s to automate card authorizations, Verifone two years ago established an Internet commerce division-crossing into a realm that has drawn acute interest from Hewlett-Packard and numerous other large corporations.
Verifone's relationships with banks and with merchants also are attractive to Hewlett-Packard. Other potential targets have similar qualities.
This emphasis has been felt by other vendors.
L. Barry Thomson, president of International Verifact, a Toronto-based company that competes with Verifone in the point of sale area, said because of the benchmark price Hewlett-Packard established for Verifone, "we all have smiles on our faces."
Verifone's stock price was up 57% Wednesday, when the deal was announced, to $47.25. It closed Friday at $47.875, down 75 cents.
Albert Irato, president of Phoenix-based Hypercom, second to Verifone in global point of sale installations, said Hypercom "over the past several months received some precursor calls and overtures" from potential acquirers.
For privately held Hypercom, the Verifone deal "has put an interesting spin on things," Mr. Irato said.
Asked to handicap the target candidates, Patrick Burton of Lehman Brothers in New York said Diebold, No. 1 in automated teller machines, "is the biggie on the hardware side. If you want to get into the software side ... Transaction Systems Architects," the Omaha-based parent of Applied Communications Inc.
He viewed Checkfree of Atlanta, in the midst of a rapid buildup in home banking and bill payment systems, as a longer-run takeover candidate.
Mr. Burton point out that Diebold began a stock buyback last week: "Clearly the company views its shares as undervalued."
Mr. Craft said recent start-ups such as Security First Network Bank, essentially a "proof of concept" for the Internet banking system known as S1, may also be ripe for acquisition.
Some of the potential acquirees have recently been acquirers, with Checkfree particularly aggressive after its 1996 purchase of Servantis Systems. Transaction Systems Architects is in the process of acquiring Regency Voice Systems Inc., which makes interactive voice response systems and software for banking by personal computer.
The Verifone "takeout" served to free the Redwood City, Calif., company from having to meet what some critics considered over-ambitious growth predictions. It set a revenue goal of $1.2 billion in 2000, up from $473 million in 1996.
But most others felt the stock market reaction reflected a belief that Verifone was a good fit for Hewlett-Packard. "This puts them more in the fast lane," said Mr. Johnson.
