Take the computer industry's second-largest player, Hewlett-Packard Co., with computer-related revenue of more than $31.4 billion in 1996, hungry to capitalize on electronic commerce. Add the stellar reputation of VeriFone, the leader in credit card-authorization products (Of the more than $800 billion in electronic transactions in the U.S. last year, VeriFone handled more than $520 billion.). In a stock swap valued at $1.29 billion, HP acquired VeriFone last April, making it a wholly-owned HP subsidiary. The plan? To accelerate Internet-based commerce and smart-card applications for financial services institutions, businesses and consumers. "The key realization we made was that there was a whole new world out there of electronic commerce and a whole new electronic consumer," says Glenn Osaka, vp and general manager responsible for HP's EC strategy. "And payments are essential to this new infrastructure. VeriFone's track record made it the only choice," he says. It's a multi-billion dollar opportunity over the next three to five years, Osaka says, adding, "This is not a trivial opportunity."

The merger enables the two companies to marry the physical world of processing to the virtual world of processing payments, says C. Lloyd Mahaffey, svp of global marketing and development with VeriFone. HP's balance sheet, sales force and global marketing will help VeriFone, a 16- year-old company with 1996 revenues of more than $472.5 million, expand even further, he says. "There's no such thing as a physical consumer and a virtual consumer anymore. They wander back and forth all day long between the two worlds, and this deal is a way to acknowledge the way consumers now behave."

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