Fiserv Inc. expects to decide by yearend which of its business units, if any, it may sell or shut down, its chief executive said.
Jeffery W. Yabuki, who has been the president and chief executive of the Brookfield, Wis., vendor since November, would not identify any candidates for the chopping block during an earnings call with analysts Tuesday evening, but he suggested that the impact would be relatively small.
He said the business lines in the crosshairs could mean writeoffs of $10 million to $20 million. Fiserv had $4 billion of revenue in 2005.
"We continue to evaluate these investments and believe we will be in a position to make a final decision by yearend," he said.
Mr. Yabuki raised the possibility of divestitures last month, when Fiserv unveiled the results of a six-month strategic review. Founded in 1984, the company has grown to become the nation's largest vendor of banking technology, largely through more than 140 acquisitions.
Fiserv reported that its third-quarter net income slipped 3% from a year earlier, to $110.1 million, but revenue rose 14%, to $1.16 billion. Per share earnings of 63 cents beat Wall Street's estimate by a penny.
Fiserv lifted the low end of its 2006 earnings guidance by 3 cents, projecting $2.51 to $2.54 per share.
Thomas Hirsch, its chief financial officer, said Fiserv plans to slow its spending next year on its health-care unit, where it has invested heavily to prepare for expected growth in consumer-directed health care, such as health savings accounts. Though the company believes such services will be highly profitable in the future, the investment has pulled down its profits in that area, Mr. Hirsch said.
Mr. Hirsch would not discuss the specific impact on profits but said, "We envision that those margins will trend upward as we continue to move forward."
Mr. Yabuki acknowledged that a check processing operation in Australia has not performed as well as expected. "We are working very closely with our banking partners to realign the contract economics to better reflect the spirit of the arrangement," he said.
Matthew J. McCormack, an analyst at Friedman, Billings, Ramsey & Co. Inc., downgraded the stock Wednesday to "market perform," from "outperform." He wrote that the shares are trading above $49, near his $50 target, and he sees no near-term growth catalyst.
Mr. McCormack said the downgrade was not a response to the quarterly results, which were in line with expectations. "However, given the likely increase in volatility in both the share price and in earnings over the coming quarters, we would wait for a lower entry point," he wrote in a note to clients.
