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VeriFone Gets Earnings Boost from Europe, Latin America

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VeriFone Systems Inc. has defied the headlines decrying gloom over the European debt crisis by enjoying continued growth in the region while continuing to expand payment-terminal installations rapidly in Latin America.

The San Jose, Calif., payment-terminal maker pleasantly surprised Wall Street observers and investors Dec. 14 by posting $416 million in revenue for the fiscal fourth quarter ended Oct. 31, a jump of 31.2% from the $317 million reported for the same period in 2010.

A strategic initiative with Google Inc.'s Google Wallet mobile-payment system represented a significant part of the glad tidings for VeriFone, which marked its sixth consecutive quarter of posting a revenue gain of 20% or more compared with the previous year.

Moreover, VeriFone's acquisition of Hypercom Corp.'s non-U.S. assets in the summer, and last month's acquisition of Point, a Stockholm-based provider of payment and gateway services, have been key factors in the company's revenue growth.

The purchase of Point, in particular, puts VeriFone on a path to make reality of its vision to offer retailers a service that easily will accept all payment types, including mobile and evolving alternative methods.

In light of reporting a fourth-quarter net income increase of 302%, at $198.8 million compared with $49.4 million last year, no one could blame VeriFone executives for the optimistic tone they took during a Wednesday conference call with industry analysts.

"Our international operations led the way in the fourth quarter, with Latin American sales again at record levels, with particular strength in Brazil," Doug Bergeron, VeriFone's chairman and chief executive, told analysts. "I think an amazing story for us continues to be Europe, which is surprising given the headline news."

The "amazing story" analogy in Europe rang true to the tune of a 112% revenue increase at $148.6 million compared with $70.1 million for the same quarter a year ago. In Latin America, VeriFone enjoyed revenue of $104.6 million, up 94.4% increase from $53.8 million.

VeriFone produced record sales levels in Latin America, fueled mostly by Brazil, which had high demand for the company's VX Evolution systems, Bergeron said. The company also captured "key customer wins" in other countries throughout that region by securing clients in Puerto Rico, Mexico and Central America, he added.

Attributing to the success in Europe is a partnership with Visa Inc. to increase the installation of in-taxi payment and media systems in London cabs leading up to the 2012 London Olympic Games, which has resulted in nearly 7,000 taxi drivers signing five-year processing agreements, Bergeron said. VeriFone expects to have 10,000 credit card terminals installed in taxis before the start of the Olympics next summer.

VeriFone continues to position itself well in the PCI-compliance arena, citing its VeriShield Protect advanced encryption software as a key driver in securing new clients during the quarter. In addition, VeriFone introduced PAYware Mobile Enterprise as a data-security method that works with existing point-of-sale systems for merchants accepting mobile payments.

The company has entered "a must-have phase for chip-and-PIN almost everywhere around the globe," Bergeron said.

That means VeriFone should benefit in markets, including the U.S., in which Near Field Communication upgrades or new terminals will be needed to accept the smart cards that are common in Europe.

"I think we are reaching a point where more and more people are saying they don't know what the future is for sure, but they know Near Field Communication is going to be part of it and they don't want to be flat-footed when that day arrives," Bergeron said.

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