Fidelity National Financial Inc., which has announced eight deals to buy technology companies since early last year, said last week that it probably will not announce more before spring.
That may leave the field open for its top rival in financial technology outsourcing, Fiserv Inc., which announced last week that it plans to make deals faster next year.
Fiserv has made just four purchases this year, down from 12 last year. But its "acquisition pipeline remains active," said Leslie M. Muma, its president and chief executive, on a conference call with analysts Friday to discuss third-quarter results.
Mr. Muma said competitive factors precluded his being specific. But he pointed out that many banks are moving into health-care processing, in which Fiserv has been making acquisitions.
"We're going to be opportunistic, depending on where our banks are going," he said.
As for Fidelity National, "We always have our list of targets," said chairman and CEO William P. Foley 2d on a conference call with analysts Thursday, but "we had a very active year this year, and it's time for us to focus on integrating InterCept."
His company announced in September that it had agreed to buy the outsourcer InterCept Inc. of Atlanta. InterCept shareholders are scheduled to vote on the deal Nov. 8, and Mr. Foley said it could close by Nov. 15.
The purchase will make Fidelity National the second-largest check-processing outsourcer, behind Fiserv.
Mr. Foley said his company plans to achieve cost savings by cutting staff and consolidating offices. There are 10 markets where the companies have operation centers with overlapping functions, he said.
Fidelity National, of Jacksonville, Fla., and Fiserv, of Brookfield, Wis., both said they had been hit by the slowdown in mortgage lending, though differently. And both plan to focus on check-processing outsourcing over the next year as banks, spurred by the Check Clearing for the 21st Century Act, shift to image-based processing. The law will take effect Thursday.
Fiserv reported net income up 15%, at $92.4 million, and revenue up 22%, at $958.1 million. Per-share earnings of 47 cents fell a penny short of analysts' expectations. The company narrowed its projection for the full year to $1.90 to $1.92, from $1.87 to $1.93.
Carla N. Cooper, an analyst at the brokerage firm Robert W. Baird & Co., said Fiserv's growth was also below expectations. In a note to clients Friday she said that though profitability was solid, there was little evidence that sales would pick up and boost its stock. She rates it "outperform."
Fidelity National said net earnings dropped 30%, to $193.8 million. Revenue fell 3%, to $2.2 billion, as declines in title insurance and lender outsourcing activities, which are cyclical, outweighed growth in financial institution software and services. Even so, per-share earnings of $1.09 matched analysts' estimates.
Fidelity National said 30% of its revenue came from operations other than its core business, title insurance. (It is the nation's largest title insurer.) Mr. Foley predicted that this will grow to 35% next year.
Geoffrey M. Dunn, an analyst at Keefe, Bruyette & Woods, said Fidelity National's the title insurance business should improve in the current quarter. He also said he believes that "the company can continue to generate margin expansion in its processing and information services operations as integration efforts continue."
Mr. Dunn, who rates Fidelity National "outperform," said he expects it to renew its plan to spin off the financial technology unit, Fidelity Information Services, in mid-2005.
Mr. Foley said banks that now process checks in-house will probably choose to outsource rather than invest in image processing, given declining check volume. "We have a real growth business in item processing," he said. The company plans to target banks with more than $5 billion of assets - which typically process checks in-house - as prospects.
But the next big move for Fidelity National could be to split itself in half. Mr. Foley reaffirmed that he intends to spin off the tech unit. A plan to do so was shelved in September when the InterCept deal was announced.
Fidelity Information Services has value "that is not being properly recognized by the market," he said. Fidelity is likely to restart the spinoff process in the first or second quarter, Mr. Foley said.
Mr. Muma of Fiserv acknowledged that internal growth rates of 7% in the quarter and 9% in the first nine months of the year were below its own goals. The growth was driven by its small health-care business, which has doubled over the past year.
Fiserv's financial segment had just 1% internal growth, because of slower mortgage and auto leasing activity and the loss of Sovereign Bancorp Inc. of Philadelphia, which moved its check-processing business to InterCept last year. Because the Sovereign contract was lost in the first quarter of this year, year-to-year comparisons should improve after next year's first quarter, Mr. Muma said.
Fiserv also expects growth in debit processing and check imaging. Though Mr. Muma agreed that a number of large banks are considering outsourcing their check processing, he said it could be late next year before banks decide whether to clear checks through imaging.
Ironically, Fiserv got a third-quarter lift from termination fees paid by banks getting out of contracts, mostly because they had been acquired. The fees added $11 million to third-quarter revenues but represent a loss of future sales.
"We are very focused on improving our internal revenue growth," but next year it will probably be in the mid-single digits, he said.
